Cautiously optimistic OPEC+ rhetoric pulls Dubai crude futures spreads up

Singapore — The Middle East sour crude complex, led by Dubai crude futures, firmed slightly in mid-morning Asian trade on Tuesday, following the rhetoric of deeper-than-expected production cuts for the OPEC+ alliance ahead of a key meeting this week.

The prompt April/May Dubai intermonth spread was pegged at 9 cents/b at 11 am in Singapore Tuesday morning (0300 GMT), rising from the 5 cents/b assessment at the close of trading in Asia on Monday.

The May/June Dubai futures spread was pegged at 12 cents/b Tuesday morning, rising from its assessment at 8 cents/b Monday at the close in Asia.

The Dubai intermonth spreads strengthened into a mild backwardation on the first trading day of March on Monday, but bullish sentiment was restrained as the outlook for demand remained weak for the ongoing May trading cycle.

The Asian crude market has priced in expected cuts in official selling prices from Middle Eastern producers for crude barrels flowing east, they told S&P Global Platts this week.

OPEC+ cuts of around 600,000 b/d touted by Saudi Arabia in recent weeks have been taken into account as well, they added.

However, trading company Lukoil suggested overnight that any agreement at the meeting may see the producer-alliance amplify the magnitude of cuts by up to 1 million b/d given the slump in global oil demand in recent months.

Lukoil vice president Leonid Fedun said late Monday that he expects OPEC+ to agree to further output cuts, which could be more than 1 million b/d, with Russia agreeing to cut 200,000 b/d-300,000 b/d of production, the Prime news agency reported.

"My expert assessment is that there will be a cut of 600,000 b/d to 1 million b/d, and maybe even more. That is for all of OPEC, and I think that most of the cut will be taken by Saudi Arabia," Fedun said, according to the Prime news report.

He added that Russia may agree to cut around 200,000 b/d-300,000 b/d.

On Monday, Russian energy minister Alexander Novak said he has not received proposals to increase the production cut by 1 million b/d. However, both Novak and Russian President Vladimir Putin have expressed support for continuing to cooperate through the OPEC+ agreement.

OPEC+ meets March 5-6 in Vienna, with any rhetoric emerging before, during or immediately after the meeting expected to trigger a corresponding reaction in oil futures prices.