Dubai Futures: Contango rangebound despite outright price rally

Singapore — Intermonth spreads for benchmark Dubai crude futures were trading in a well-worn range Thursday morning in Asia, the last trading day for Middle East sour crude for the month of April, even as outright oil prices rallied in double digits globally.

At 11 am in Singapore (0300 GMT), the June Dubai futures contract was pegged at $28.04/b, up $3.28/b or 13.2% from the $24.76/b assessment at Wednesday's 0830 GMT Asian close.

Dubai's rise emulated similar jumps in prices for ICE Brent and NYMEX crude futures, with the June ICE Brent contract up 17.3% to $24.49/b within the same timeframe.

But intermonth spreads held steady for the Dubai curve -- depicting little change in underlying fundamentals -- which remain in contango just like other oil benchmarks around the world.

At 11 am Thursday in Singapore, the May/June Dubai futures spread was pegged at minus $2.35/b, up 10 cents/b from minus $2.45/b assessed at 0830 GMT Wednesday. Similarly, the June/July spread edged up 15 cents/b over the same period to be pegged at minus $1.03/b at 0300 GMT Thursday.

Prompt contract oil prices were boosted by an initial spurt in US crude futures overnight, after market participants took bullish cues from inventory statistics that showed a rebound in refined product demand, with a lower-than-expected build in crude stocks for the week.

Back in Asia, however, little was changed in terms of market dynamics, crude traders said Thursday morning.

Several traders pointed out that Chinese demand, while helpful, could not singlehandedly clear the excess supply in the Middle East crude market.

Demand for some Middle East crude grades has climbed in recent weeks, as Chinese buyers have attempted to procure cheap barrels and ply them into storage, they added.

Grades such as Iraqi Basrah crude and Oman have retained price differentials several notches above the wider discounted Middle East crude market for May and June-loading cargoes.

Several market participants pointed out the strength in China's Shanghai crude futures contract, which would lend support to demand for the Basrah and Oman crude grades.

The contract's underlying INE exchange designated storage saw volumes more than double in April to 48.13 million barrels, from 22.03 million barrels at the end of March, enabling physical players to bring cargoes onto warrant.

According to INE data, the volume of crude held on warrant this month has already reached an all-time high, more than double to 8.2 million barrels on April 28, from 3.4 million barrels at the beginning of the month.