Dubai futures spreads rangebound near parity as outlook remains bearish

Singapore — Prompt intermonth spreads for benchmark Dubai crude futures were rangebound near parity in mid-morning trade in Asia July 22, with sources expecting the outlook to remain bearish as macroeconomic uncertainty continues to keep demand lackluster amid ample supply.

At 11 am Singapore time (0300 GMT), the August/September Dubai futures intermonth spread was pegged at 1 cent/b in backwardation, compared with a contango of 3 cents/b at the Asian close the day before, S&P Global Platts data showed.

The September/October spread was pegged at a contango of 5 cents/b, narrowing from a contango of 13 cents/b at the previous close, the data showed.

Meanwhile, the September Brent/Dubai Exchange of Futures for Swaps was pegged at 50 cents/b at 0300 GMT, sliding 16 cents/b from the previous close.

Market sources said the bearish outlook was likely to weigh on the market going forward.

"Still flooded with supply, [refining] margins are average and with the OSP hikes recently, I don't see a lot of buying interest coming back," a Middle East crude oil trader based in Northeast Asia said.

Buyers from China, a key importer of waterborne crude, have reduced purchasing in recent weeks, market sources said.

Spot price differentials have trended lower for various Middle Eastern sour crude grades in the latest trading cycle.

"Light grades have mostly gone into the 70 cents discount range," another sour crude oil trader said.

The intermonth structure for Dubai swaps was expected to hover near parity to a slight contango for the time being given the bearish backdrop, market sources said.