Dubai crude futures spreads steady to lower on mixed fundamentals

Singapore — Dubai crude futures and Brent/Dubai spreads were steady to lower in Asia trade Thursday after a decline in oil markets overnight and amid muted spot activity toward the end of the current trading cycle for Middle East sour crude.

The April Brent/Dubai Exchange Futures for Swaps spread narrowed from Wednesday's assessment, as did the contango in the prompt Dubai intermonth spread for March/April crude futures. However the contango looked likely to widen down the curve for April/May Dubai crude futures due to the bleak demand outlook, traders said Thursday.

The April Brent/Dubai EFS was pegged at $1.69/b on Thursday at 11 am in Singapore, narrowing from the assessment of $1.77/b at 4:30 pm Singapore time (0830 GMT) Wednesday.

ICE Brent futures fell sharply overnight on continued bearish signals for global macroeconomic and oil demand growth, fueled in a large part by the rapid spread of the coronavirus beyond China.

At 11 am in Singapore, April ICE Brent crude futures were seen trading around $52.82/b, down sharply from $54.50/b at 0830 GMT Wednesday.

April Dubai crude futures followed Brent lower to be pegged at $51.13/b at 11 am, down from $52.73/b at Wednesday's Asian close.

Intermonth spreads for Dubai crude futures remained in contango Thursday morning, but saw mixed direction compared to Wednesday. The March/April spread rose by a few cents to be pegged at minus 36 cents/b at 11 am Thursday from an assessment at minus 39 cents/b Wednesday.

Further along the curve, sentiment looked bleaker, with the April/May Dubai crude futures spread dropping to a contango of 4 cents/b at 11 am from an assessment at minus 2 cents/b at 0830 GMT Wednesday.

With April spot trading concluded for Middle East cargoes in Asia, market participants said they were on the lookout for wider indicators to gauge direction for coming months.

One indicator of market direction -- the Dubai M1/M3 spread -- fell further overnight and has averaged 2 cents/b to date in February. The spread averaged $2.11/b in January. It has plunged in February as intermonth spreads flipped into contango and spot market differentials for April-loading cargoes traded at big discounts amid a dearth of demand from refiners.

The spread could hit parity later in the week, and this would imply a heavy correction for upcoming official selling prices from Middle East crude producers, traders said.

Producers such as Saudi Aramco, Iraq's SOMO and Qatar Petroleum are expected to issue prices in the coming days for cargoes loading in April and headed to Asia.