Dubai futures structure steadies in contango amid lukewarm demand prospects

Singapore — The benchmark Dubai crude futures market structure was in a steady contango during mid-morning trade in Asia July 23, as lukewarm demand prospects weighed on the prompt market outlook.

At 11 am Singapore time (0300 GMT), the August/September Dubai futures intermonth spread was pegged at a contango of minus 8 cents/b, widening 5 cents/b from the previous close, Platts data showed.

The September/October spread was pegged at a contango of 7 cents/b, narrowing just a cent on the day. Meanwhile, the September Brent/Dubai Exchange of Futures for Swaps was pegged at a stable 46 cents/b.

The derivatives market remains weighed by bearish sentiment in the sour crude spot market, which has seen weaker refining margins in China contribute to lower demand projections.

Several cargoes have changed hands at steeper discounts following recent tenders and deals, with discounts for lighter grades falling into the 70 cents/b range lately, market sources said.

The spread between Murban versus its OSP was assessed at minus 70 cents/b, Platts data showed. The spread had been at a premium from end-April to mid-June, before delving deeper into discount territory going into July, the data showed.

Medium grades like Upper Zakum have also traded at steeper discounts in the spot market, following the greater extent of the hike in its OSP compared with other grades, the sources said.

Reflecting bearish fundamentals, the cash/futures structure for Dubai crude has also softened to a seven-week low.

The Dubai crude cash/futures spread was assessed at a premium of 59 cents/b at the 4:30 pm Singapore close on July 22, sliding 8 cents/b from the July 21 close, Platts data showed. The spread was last at 59 cents/b on June 5, marking a seven-week low.