CRUDE MOC: Dubai contango eases on first trading day for May cycle

Singapore — Cash Dubai's contango spread to futures eased several notches as the Middle East sour crude market rolled over to the May trading cycle on Monday.

The new prompt May cash Dubai was assessed at a discount of 13 cents/b to May Dubai futures at the close of trading in Singapore at 4:30 pm (0830 GMT).

Comparatively, the April Dubai cash/futures spread had been assessed at a 28 cents/b discount on Friday, the last trading day for April contracts.

May cash Oman's spread to May Dubai futures also ticked up day on day, being assessed at a premium of 15 cents/b. The April Oman spread to Dubai futures had been assessed at minus 28 cents/b at the 0830 GMT close Friday.

Despite the weak oil demand outlook holding the Dubai complex in contango at the onset of the May trading cycle, the uptick in the Dubai cash/futures spread could signal market confidence in a producer-led price and supply correction for sour crude barrels.

Asian buyers surveyed this week said they expected price cuts of around $1/b for the majority of Middle East sour crudes flowing to Asia in April, guided by the change in the Dubai M1/M3 structure between January and February.

The structure -- often tracked as a proxy for spot market sentiment -- dropped $2.13/b from January to average minus 2 cents/b for February.

Meanwhile, the Platts Market on Close assessment process for Middle East sour crude saw seven May Dubai partials traded on Monday, all at an outright price of $50.55/b. Shell was the seller for all seven partials, with Total, PetroChina and Vitol on the buying end.

Each partial is 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.

The Quality Premium for May-loading Murban crude oil is 87.45 cents/b, and will be effective for trade in May-loading cargoes during the Platts Market on Close assessment process through March.

The Quality Premium in February for April-loading Murban crude was 75.80 cents/b.