Dubai Futures: Middle East crude traders still cautious despite recovery cues

Singapore — Benchmark Dubai crude futures and intermonth spreads were relatively steady during mid-morning trading hours in Asia on Monday, with traders exercising caution ahead of a possible turnaround in market sentiment.

At 11 am in Singapore (0300 GMT), the new front-month July Dubai futures contract was pegged at $28.29/b, edging down 17 cents/b or 0.6% from the $28.46/b it was assessed at on Thursday, the last trading day in Asia for April.

Meanwhile, intermonth spreads -- depicting forward market structure -- ticked upward, indicating a slight firming of market sentiment.

At 11 am Monday in Singapore, the June/July Dubai futures spread was pegged at minus 89 cents/b, up 9 cents/b from minus 98 cents/b assessed at 0830 GMT April 30. Similarly, the July/August spread edged up 11 cents/b over the same period to be pegged at minus 73 cents/b at 0300 GMT Monday.

The prompt M1/M2 and M2/M3 intermonth spreads rising out of the sub-$1/b and $2/b contango ranges could spell a turnaround in market direction, traders said.

"The market gave a sign of bottoming out at the end of the [last] cycle," a Singapore-based trader said Monday morning. "Right now the spreads are much stronger," he added.

With OPEC+ members initiating production cuts and reducing exports to customers across Asia, and with product margins for lighter grades edging up in recent weeks, market participants are cautiously eying signs of rebalancing, they told S&P Global Platts.

Still, recovery could take some time, they said, noting that the April average for the June Dubai cash/futures spread had come in at minus $9.15/b. This is down more than $6/b from minus $3.11/b the month prior.

"The spot market is not in premium [this month], even if the Dubai structure is getting stronger," a second trader said.

Going forward, crude market participants in Asia will await official selling prices from producers to gauge a better sense of market direction this month, they said Monday.

Producers such as Saudi Aramco, UAE's ADNOC and Qatar Petroleum are expected to be some of the first to issue their respective OSPs for June-loading cargoes this month.

Price setting could be a complex exercise given the disconnect in various OSP indicators this month, traders said.

"I don't think OSPs are a straightforward easy call this month," added the first trader.