Dubai crude futures outpace Brent in mild recovery amid further price cuts

May Dubai crude futures overshadowed ICE Brent in a mild recovery in mid-morning trading hours in Asia Tuesday after oil prices crashed nearly 30% at the start of the week, even as more Middle Eastern producers followed with price cuts of their own.

At 11 am in Singapore Tuesday (0300 GMT), the May Brent/Dubai Exchange Futures for Swaps spread narrowed to 50 cents/b. The EFS, which had averaged 58 cents/b last week, shot up Monday after Dubai futures fell rapidly on the impact of Saudi Arabia's move to undercut other producers by slashing prices for its crude grades to Asia, Europe and the US.

Dubai crude assessments are a key component of pricing for Arabian crude that flow into Asia.

The May Dubai crude futures price ticked up 4% Tuesday morning to $36.24/b at 11 am. It was assessed at $34.77/b at the 4:30 pm close in Singapore on Monday.

But traders and refiners in Asia pointed to intermonth spreads for Dubai futures treading a similar contango as the day before, indicating that underlying demand fundamentals for the Middle East sour crude market in Asia hadn't shifted overnight.

"Overall the issue at hand, the underlying problem at the heart of everything, is demand," said a trader with a North Asian refinery on Tuesday.

"We need recovery in demand and not just the flat price," the trader added.

Elsewhere, other producers from the Middle East began issuing their official selling prices for the month, following Saudi Arabia's lead with bigger-than-expected price cuts.

Abu Dhabi National Oil Company has cut the official selling prices for its four crude oil grades that loaded in February by $11.70/b from January, according to a company notice issued late Monday.

But on closer inspection, the grade's OSP differentials to underlying Dubai crude assessments were cut by only $1.63/b, compared with $5/b and $6/b cuts for Saudi grades.

ADNOC issues its OSPs retroactively, while Saudi Aramco issues them on a forward-looking basis.

Still, market participants said the chronological gap between the two OSP months should not have been so wide.

"Normally this would work, but we are not in a normal situation right now, with Saudi whacking their prices down six dollars," the refinery trading source said.

The Murban OSP was at a premium of $1.88/b to Dubai crude assessments in February, down $1.63/b month on month, according to S&P Global Platts data.

Similarly, ADNOC cut the OSPs for Das Blend, Umm Lulu and Upper Zakum by $1.63/b each for February.

Publishing its prices on a turbulent day for crude prices, ADNOC said it "has always set a fair and reasonable retroactive price for its crude oil that is consistent with market conditions," adding that "this practice will continue."