Backwardation for Middle East crude strengthens as prompt trade cycle nears end

New York — Backwardation in the Dubai crude futures strengthened early afternoon in Asia on June 26 amid expectations of a re-emergence in demand as the current trading cycle for the Middle East sour crude nears its end.

The prompt July/August Dubai crude futures spread was pegged at 42 cents/b backwardation at 1 pm in Singapore (0500 GMT) on June 26, up 13 cents/b from 29 cents/b assessed at the 4:30 pm close (0830 GMT) the day before, S&P Global Platts data showed.

The August/September spread also risen to 11 cents/b early afternoon on June 26, rising 10 cents/b from the assessed 1 cent/b premium at the Asian close the day before.

Both the July/August and August/September spreads at 1 pm Singapore time on June 26 were the highest seen for this month so far, Platts data showed.

The spreads have strengthened as the trading cycle for August-loading cargoes Middle East sour crude nears its conclusion on June 30.

While Asian refiners have largely fulfilled their requirement for Middle East sour barrels this month, traders have noted that marginal demand could reappear.

August Dubai futures were also higher at $40.76/b at 1 pm Singapore time on June 26, up 3.4% from the Asian close the day before.

Dubai's spread to ICE Brent futures, or the Brent/Dubai Exchange Futures for Swaps, widened to be pegged at 83 cents/b early afternoon on June 26, up 26 cents/b from the 57 cents/b assessed at the Asian close the day before.

Similarly reflecting the uptrend, the spread between physical cash Dubai against same-month Dubai futures (M1/M3) -- a key indicator of spot market sentiment for sour crude in Asia -- was assessed at a premium of $1.12/b at the 4:30 pm (0830 GMT) Singapore close on June 25, up 14 cents/b from $0.98/b assessed the day prior.

The spread was the highest since June 18 when it was assessed at $1.31/b, Platts data showed.