CRUDE MOC: Dubai structure ticks up as Middle East crude supply glut abates

Singapore — Benchmark cash Dubai's discount to futures eased Friday, after falling to its lowest discount on record last week, with the Middle East sour crude market firming up due to receding spot availability of June loading cargoes, said traders Friday.

"Persian Gulf barrels had a somewhat decent rebound of values," a crude trader based in Singapore said, as offers from sellers for June loading cargoes crept into premiums from deep discounts seen just days earlier.

The June Dubai cash/futures spread averaged minus $9.34/b for the week of April 20-24, up more than 10% from minus $10.55/b averaged the previous week, S&P Global Platts data showed.

Availability of Middle East crude grades in the spot market suddenly looked scarce, but this was more likely due to workable storage economics incentivising sellers to clear excess barrels into tanks rather than show them to buyers, said traders.

"Why sell at these levels? Differentials are so low, contango is wide and the only bids are for storage now anyway so [you] might as well store it yourself," the trader added.

Coming in at a month-to-date average of minus $9.57/b, the Dubai spread -- commonly referred to as the Dubai M1/M3 structure -- is still a sharp step down from minus $3.11/b over March, with the deeper contango making a sell-later strategy more feasible.

Chinese refiner Rongsheng failed to award a spot tender in which the buyer was seeking cargoes of Middle East sour grades loading over June due to the high offers now seen in the market, said participants.

Meanwhile, Chinese major Unipec picked up a rare spot cargo of Abu Dhabi's Umm Lulu crude from equity holder Cepsa at a small premium of around 5 cents/b versus its OSP on Friday afternoon in Asia. The purchase comes on the heels of a similar cargo of Murban crude bought by Japanese trader Mitsui just days ago, where the buyer paid a discount of 40 cents/b to the OSP for the June cargo.

Murban and Umm Lulu are nearly similar, light sour crude grades originating from Abu Dhabi.

Meanwhile, the Platts Market on Close assessment process for Middle East sour crude in Asia saw a total 19 partials change hands Friday. This brings the total count for the month to 139, with 108 Dubai and 31 Oman partials traded over April.

Each partial is 25,000 barrels in size. A convergence occurs when 20 partials are traded between two counterparties, resulting in a full 500,000 barrel physical cargo being declared from the seller to the buyer.