Dubai futures market structure softens slightly after OPEC+ eases supply cuts

Singapore — The market structure for Dubai crude futures softened slightly in mid-morning trade July 16 after OPEC+ agreed overnight to ease its supply cuts from August.

The August/September Dubai futures intermonth spread was pegged at 19 cents/b backwardation at 12 pm Singapore time (0400 GMT), down 4 cents/b from the Asian close the day before, S&P Global Platts data showed.

The September Dubai swap was pegged at $42.84/b at 0400 GMT, down 13 cents/b over the same period.

The OPEC+ coalition agreed to taper production cuts from the current 9.7 million b/d to 7.7 million b/d from August at a Joint Ministerial Monitoring Committee July 15.

Saudi energy minister Prince Abdulaziz bin Salman noted the cuts would actually be larger than 7.7 million b/d since countries that exceeded their quotas in May and June by a combined 840, 000 b/d have agreed to make extra compensation cuts in the third quarter.

This indicates that only about 1.15 million b/d of production will be added, 43% less than the 2 million b/d headline figure, according to an analyst report.

"The OPEC meeting [outcome] yesterday was not much of a surprise. Refiner margins are still not too good across Asia, demand is not going to rebound too much," a refinery source based in Northeast Asia said.

Other market sources noted that sour crude market fundamentals have not changed much in recent sessions.

"We don't expect demand to rebound back a lot, especially with the coronavirus uncertainty... margins remain capped and the consecutive hikes [in official selling prices] are not helping much," a crude oil trader based in Singapore said.

The OPEC+ committee's next meeting has been scheduled for August 18, with a delegate-level technical committee meeting the day before. The next full OPEC+ meeting is scheduled for November 30 and December 1 in Vienna.