DUBAI FUTURES: Brent/Dubai May EFS narrows; US arbitrage threats stay low

New York — Front-month exchange of futures for swaps narrowed mid-morning on March 2 although flow of US arbitrage crudes into Asia could be miniscule this month, said sources.

The May Exchange of Futures for Swap was valued at $2.54/b at 11 am (0300GMT) in Singapore on March 2, down by 13 cents/b from the Asian close on March 1, S&P Global Platts data showed.

The Brent/Dubai EFS is a key indicator of the spread between light, sweet and heavy, sour crudes, and a narrower EFS makes crude priced against Dubai less economically attractive for Asian refiners compared to Brent-linked ones.

Even as the EFS spread narrows, it remains too wide for US crude to be considered an economical option for Asian buyers, said traders.

Despite the easing of freezing temperatures in the Atlantic Basin, US crude production will still take time to return to normal levels, said a crude oil trader.

"The wide EFS makes it very hard for [US crude] to come to Asia, and the situation will likely keep it like that this month," said a source from a North Asian refiner.

The disruption, particularly of WTI Midland crude, has increased demand for lighter sour crude grades, traders said.

"Light grades [will] still be supported this month, as [US arbitrage] cannot come back so fast," said a trader based in Singapore.

However, arbitrage from West Africa remains continues to weigh down on demand for Middle East crude as supply overhang remains a persistent problem in the region, said another crude oil trader.

Meanwhile, anticipation is high about the outcome of the OPEC+ alliance's upcoming meeting for further clarity on supply fundamentals, as production quotas for the month will be up for discussion.

"Saudi Arabia may want to be conservative [in rolling back cuts] but flat prices are so high," said the trader with the North Asian refinery.

At mid-morning in Singapore (0300 GMT), the May/June Dubai time spread was valued at 68 cents/b, flat from Asia close Mar. 1, Platts data showed.

Meanwhile, the June/July Dubai time spread was valued at 61 cents/b, inching down 2 cents/b from the previous day assessment at Asia close.