Dubai Futures: Middle East crude complex pares losses as buying activity picks up

Singapore — Benchmark Dubai crude futures and intermonth spreads ticked up in mid-morning trading hours on Thursday, recouping previous losses and receiving a measure of support from a brief spurt of buying activity in the spot market.

At 11 am in Singapore (0300 GMT), the June Dubai futures contract was pegged at $26.02/b, up 13.3% from its assessment at $22.97/b at Wednesday's close in Asia.

Part of the recovery in outright crude futures prices came as global oil prices rose after US President Donald Trump threatened action against Iranian warships in the Persian Gulf.

Specifically in Asia, however, there was a brief spark of buying activity amid a generally muted trading cycle, with some Chinese refiners seeking Middle East sour crude cargoes, market participants told

S&P Global Platts. The uptick in Chinese buying appetite follows the release of fresh crude import quotas from the government earlier this week.

China's Ministry of Commerce issued 52.99 million mt (388.42 million barrels) of crude import quotas to 31 qualified independent and non-major state-owned refineries in the second batch for 2020. The new allocations take the total crude quotas awarded to 44 qualified refineries to 152.61 million mt for 2020, accounting for 85% of the refineries' annual quota ceiling.

Chinese independent refiner Rongsheng was seeking June-loading cargoes of Middle East sour crude in a tender closing Thursday, market sources told Platts. Although tender details were not immediately available, the refiner has previously purchased medium sour grades like Upper Zakum and Oman via similar spot tenders. Last month, Rongsheng picked up several cargoes of May-loading Oman crude in its tender, paying discounts averaging $1.90/b under Platts front-month Dubai crude assessments.

But with outright Oman cargoes for June pricing around $4/b above June cash Dubai crude this month, traders said the grade did not seem like a good buy for refiners. Instead, Rongsheng may aim for comparable medium and heavy sour crudes such as Qatari Al-Shaheen or Abu Dhabi's Upper Zakum, they said.

The refiner was also seen buying two million barrels of Iraqi Basrah Light crude separately, market sources said. Price levels were not immediately clear.

Meanwhile, intermonth Dubai crude futures ticked up from Wednesday's assessment levels as well. The May/June spread was pegged at minus $3.55/b at 0300 GMT Thursday, climbing 32 cents/b from its assessment at 0830 GMT Wednesday. The June/July spread rose Thursday morning to be pegged at minus $1.56/b after being assessed at minus $1.75/b Wednesday.