CRUDE MOC: Dubai cash/futures spread retains strength going into new trading month

Benchmark cash Dubai crude looks set to retain its strength against Dubai futures going into the fresh trading cycle for September-loading cargoes, with sentiment holding steady on July 1 as the market awaits fresh cues ahead of the release of new Middle East official selling prices.

The new prompt-month September cash Dubai was assessed at a premium of $1.20/b over same-month Dubai futures at the 4:30 pm (0830 GMT) Singapore close on July 1, just a tad higher than the $1.19/b premium assessed on June 30, S&P Global Platts data showed.

The spread, a key indicator of spot market sentiment for sour crude in Asia, has strengthened from an average of minus $2.73/b for the whole of May to a premium of 84 cents/b for the whole of June.

The spread has risen following OPEC+ alliance's extension of the production cut of 9.6 million b/d to July and increasing pressure on Iraq, Nigeria, Angola and Kazakhstan to comply with the deal. The compensatory cuts are expected to be made over July-September in addition to their set quotas.

In recent days, sentiment for the Middle East sour crude complex has been further supported by reports that Russia has cut exports of its sour Urals crude to the lowest level in 10 years.

While supply cuts from OPEC+ have helped support sentiment, some traders said that a fresh round of OSP increases this month, particularly for the lighter crude grades, could dampen appetite from Asian refineries for these Middle East barrels.

"[I am] less worried about supply-side [factors] than demand-[side]. [Higher OSPs could further] increase the cost of refining with product cracks [being] so bad," said a crude trader with a Southeast Asian refiner.

Middle East producers are expected to release their August OSPs in the coming days.