Brent/Dubai EFS dives past minus $1/b as producers increase April crude term volumes

Singapore — Efforts by Middle East oil producers to maximize crude term supply to customers bore fruit this week, but pushed ICE Brent futures into a $1/b discount under Middle East benchmark Dubai crude futures, as demand prospects of spot crude supply weakened for the current trading cycle.

At 11 am in Singapore Thursday, the May Brent/Dubai EFS was pegged at minus $1/b. The spread was assessed in negative territory for the first time ever Wednesday, according to S&P Global Platts records.

Competition for European market share saw the spread assessed at minus 19 cents/b at 4:30 pm Singapore time (0830 GMT) Wednesday. Traders cited a sharp cut in Saudi Arabia's crude official selling price for European customers as the key reason for Brent slipping into a discount to the Middle East benchmark.

Refiners took advantage of cheap prices from Middle East producers, such as Aramco, Kuwait Petroleum and Iraq's SOMO, to maximize their term volumes as April allocations were finalized overnight, said market sources on Thursday morning.

Producers had told refiners they could nominate incremental volumes over and above their contractual stipulations, which several refiners in Europe and Asia reportedly took advantage of, said traders.

Some refiners in South Korea, for instance, had informed light sour crude grades sellers that their monthly requirement had been fulfilled via term supply from Saudi Arabian Extra Light, and they would not be making spot market barrel purchases, such as ADNOC's Murban -- a staple import for Korea -- this month.

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 to 13 million b/d from 12 million b/d, according to a filing from the kingdom's stock exchange, Tadawul.

Intermonth spreads for Dubai futures sunk deeper into contango Thursday morning, with spot market demand for crude barrels in Asia looking bleaker than previously expected.

The prompt April/May intermonth Dubai futures spread was pegged at minus $1.09/b at 11 am in Singapore (0300 GMT), down from minus 88 cents/b at Wednesday's close.

The spread was last assessed lower on January 13, 2016, at minus $1.15/b, Platts records showed.

The May/June Dubai crude futures spread also dipped lower Thursday morning, being pegged at minus $1.05/b. This was down from Wednesday's assessment at minus 80 cents/b.