CRUDE MOC: Deeper contango for Dubai pulls Feb average below parity

Singapore — Cash Dubai's discount to futures widened further Thursday, pulling the monthly average for the spread down into negative for the first time since March 2018, Platts data showed.

The April Dubai cash/futures spread was assessed at minus 55 cents/b at the end of the Platts Market on Close assessment process for Middle East sour crude Thursday. This is down 12 cents/b from the minus 43 cents/ b assessed at Wednesday's close.

The monthly average for the spread fell to minus 1 cent/b for February to date, from 2 cents/b on Wednesday. The monthly average of the spread, also known as the Dubai M1/M3 structure, is tracked by the Asia crude market as an indicator of spot market direction.

The monthly average for Dubai M1/M3 last fell into contango over March 2018, when it averaged minus 30 cents/b for the May 2018 spot trading cycle. Currently, the Middle East sour crude market is in the midst of wrapping up the April 2020 spot cycle.

The M1/M3 spread is considerably lower from last month's figure, which stood at a monthly average of $2.11/b over January. The contango average underscores just how bleak demand-side fundamentals are at the moment, traders pointed out.

Meanwhile, the Platts MOC on Thursday saw 10 partials of April Dubai crude change hands between various counterparties. This brings the month's count up to 129 partials in all. Out of these, three partials for Oman have also traded in the MOC this month. Additionally, one cargo of Al-Shaheen crude has been declared on a convergence of Dubai partials, while eight full cargoes of various Middle East crude grades have been traded directly via the MOC.

Each cargo on the MOC is 500,000 barrels in size, while partials are 25,000 barrels in size. A convergence occurs when twenty partials are traded between two counterparties, resulting in a full 500,000 barrel physical cargo being declared from the seller to the buyer.

For Dubai partials, the seller has the option to deliver a Dubai, Oman, Upper Zakum, Al-Shaheen or, with a quality premium, Murban cargo to the buyer.