CRUDE MOC: Plunging Oman, Dubai spreads signal deeper price cuts for Middle East grades

Singapore — Middle East sour crude benchmarks Dubai and Oman touched fresh lows against the June Dubai futures contract Thursday at the end of the Platts Market on Close assessment process in Asia, eliminating doubts around the need for more price cuts for crude grades linked to the markers.

June cash Dubai dove 72 cents/b on the day to a discount of $8.68/b against June Dubai futures. The contract had hit a record low just a day earlier on April 1, at minus $7.96/b, but Thursday's dip shed light on the severity of oversupply that could come through in Asia if Middle East producers fail to rein in production levels, market participants said.

On a similar trajectory, June cash Oman also sank against June Dubai futures Thursday, to be assessed at minus $8.64/b, compared with minus $7.77/b Wednesday. Both Dubai and Oman are used to price crude grades loading from the Persian Gulf and flowing into Asia.

Spot price differentials for a whole array of other Middle East sour crude grades have begun sinking past March levels, even after taking into account expected $2-3/b price cuts from producers such as Saudi Aramco, ADNOC and Qatar Petroleum this month.

Deep negatives on spot prices for June-loading cargoes suggest further price corrections are on the cards for sour crude grades, even if producers cut OSPs for the upcoming May-loading set.

The producers are expected to issue their official selling price differentials in the coming days. Spot trading will commence shortly thereafter.

Middle East crude trades two months ahead of its scheduled loading to Asia, meaning June loading cargoes will trade through the month of April.

June cash Murban's OSP differential was assessed at minus $2.25/b Thursday, after taking into account a $2-3/b OSP cut for May loading cargoes. Similarly, values heard in the wider market for medium sour Upper Zakum crude showed that the grade would likely trade in discounts even after a $1-2/b price cut for May. Other Middle East crude grades such as Qatar Land, Qatar Marine and Al-Shaheen were in the same boat, said crude traders based in Asia.