Contango in Middle East crude spreads eases as demand improves

Singapore — Benchmark Dubai crude futures spreads were slightly firmer on the week in mid-morning Asia trade Friday, reflecting a bullish turn of sentiment for Middle East sour crudes in the spot market.

At 11 am in Singapore (0300 GMT), the June/July Dubai crude futures spread was pegged at minus 23 cents/b, up slightly from minus 27 cents/b assessed at Thursday Asian close in Singapore.

Week-on-week, the contango in the spread eased a few notches, averaging minus 30 cents/b from May 18 to May 21, while the previous week (May 11-15) this had averaged minus 35 cents/b.

Similarly, for July/August, the spread's average for the week rose to minus 34 cents/b, from an average of minus 42 cents/b over May 11-15, Platts data showed.

At 11 am in Singapore, the July/August spread was pegged at minus 32 cents/b, up from minus 34 cents/b assessed at the 0830 GMT close.

The strength in the Dubai crude futures spreads was mirrored in physical trades concluded in the spot market in Asia this week, with several cargoes seeing firm premiums from end-users in the region.

July loading barrels of Murban, Das, Upper Zakum and Basrah Light crudes all traded in premiums this week. Light sour grades were fetching premiums ranging from $1/b to $1.40/b over their OSPs, according to traders.

Meanwhile, medium grades like Upper Zakum saw trades at premiums of around $1.30/b to $1.60/b over its OSP, while the most recent Basrah Light deals saw buyers paying premiums of around $3/b to $4/b over the June Basrah OSP for cargoes headed to Asia.

An equivalent strengthening of Brent-linked crudes may have led to end-user preference for competitive Middle East barrels, said traders on Friday, May 22.

The July Brent/Dubai Exchange Futures for Swaps, which was pegged at minus 48 cents/b on Friday, May 22 at 11 am (0300 GMT), firmed considerably week on week, implying a stronger -- and more expensive -- Brent side of the complex.

The EFS averaged minus 19 cents/b for the week of May 18-21, up from an average of minus 69 cents/b over May 11-15, Platts data showed.

The July EFS was assessed at minus 18 cents/b on Thursday, May 21, at 0830 GMT.