ICE Brent trades below Dubai as Saudi targets Europe market share

Singapore — Front-month ICE Brent futures slipped to a discount to Dubai crude futures on concerns that cheaper Middle East crude supplies into Europe may weaken the demand-supply balance.

At 4:30 PM Singapore time Wednesday, ICE Brent May futures were trading at $36.76/b, below May Dubai futures bid/offered at $36.93/b and $36.97/b, respectively. At the time, May Brent/Dubai Exchange Futures for Swaps was trading at minus 19 cents/b, the first time the contract has been assessed at a discount, according to S&P Global Platts data.

Traders cited a sharp cut in Saudi Arabia's crude official selling price for European customers as a key reason for Brent slipping into a discount to the Middle East benchmark.

"More Middle East supply can go to Europe too... [as the] OSP for Europe is discounted even more," a Singapore-based trader with an oil major said.

Other Middle East producers, such as Iraq's SOMO and Kuwait Petroleum, have followed suit this week, mounting pressure on the fight for market share with one another as well as with Russian barrels in the region.

Russian crudes such as Urals in Europe and ESPO Blend in Asia are likely to come under pressure following the price cuts by Middle East producers, market participants said.

Aramco this week stepped up efforts to increase export capacity to customers, with the company receiving a directive from Saudi Arabia's Ministry of Energy to increase its maximum sustainable capacity from 12 million b/d to 13 million b/d, according to a filing from the kingdom's stock exchange, Tadawul.

The announcement comes a day after Aramco said it will provide its customers with 12.3 million b/d of crude for April -- an increase of 300,000 b/d on its maximum sustained capacity of 12 million b/d.

The state-owned oil giant's highest ever production was recorded at 11.09 million b/d in November 2018, according to its self-reported figures to OPEC. S&P Global Platts Analytics estimates sustainable Saudi crude production capacity at around 10.5 million b/d and current production at 9.75 million b/d.