Dubai futures intermonth spreads steady to narrower on poor margin expectations

Singapore — The intermonth spreads for benchmark Dubai crude futures were steady to narrower on July 2, as expectations of continued poor refining margins capped gains.

At 12 pm in Singapore (0400 GMT), the August/September Dubai crude futures spread was pegged at a 29-cent/b backwardation, narrowing 4 cents/b from the 33 cents/b assessed at the 4:30 pm close (0830 GMT) on July 1, S&P Global Platts data showed.

Meanwhile, the September/October spread was pegged at a 9-cent/b backwardation, narrowing 2 cents/b from the 11 cents/b assessed on July 1, the data showed. The September Brent-Dubai Exchange of Futures for Swaps spread, or EFS, was pegged at a 90-cent/b premium, wider compared with the 82 cents/b premium at the Asian close on July 1.

While sentiment was mostly steady with the market awaiting fresh cues, demand was looking bearish amid expectations of a new round of increases to the official selling prices of Middle East crude, according to market sources. If this does happen, it would be the third straight month of OSP hikes.

"Flat price is bouncing back to $40/b levels. OSP is very high, [the] refining margin is not good," a Middle East crude oil trader said July 2.

Saudi Aramco is expected to raise the OSP differential of its Arab Light crude bound for Asia in August by between 80 cents/b and $3/b, participants surveyed by S&P Global Platts said earlier this week.

Traders also noted that a sustained backwardated market structure could see the release of more barrels from floating storage this month.

Meanwhile, the spread between cash Dubai crude and Dubai futures was holding largely steady in recent days. The spread had been 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, Platts data showed.

The sour crude complex was largely steady after rallying for most of June, following the extension of OPEC+ production cuts.