Bearish outlook keeps Dubai crude futures structure in contango

Singapore — The market structure for benchmark Dubai crude futures remained in a steady contango in Asian mid-morning trade July 24, with sources saying the outlook remained bearish.

At 11am Singapore time (0300 GMT), the August/September Dubai futures intermonth spread was pegged at a contango of minus 20 cents/b, widening 2 cents/b from the previous close, Platts data showed. The September/October spread was pegged at a contango of 18 cents/b, also widening 2 cents/b from the previous close.

The derivatives structure weakened into contango late last week and remained there this week amid signs of bearish sentiment in the current trading cycle.

This was also reflected by a substantial dip in the Dubai cash/futures spread at the previous close.

The Dubai crude cash/futures spread was assessed at a premium of 34 cents/b at the 4:30 pm (0830 GMT) Singapore close July 23, down 25 cents/b on the day, Platts data showed. The spread has narrowed sharply from $1.20/b at the start of this month.

The overall spot market has seen price differentials sliding deeper into discount this week.

The Murban spread versus the grade's official selling price was assessed down 30 cents/b day on day at minus $1/b at the Asia close July 23, Platts data showed. An offer at minus 95 cents/b for the grade remained standing at the close of the Platts Market on Close assessment process on the day.

"Demand from China and Japan is slow and Thailand also didn't buy a lot," a Singapore-based crude oil trader said.

Demand from Asian refineries was expected to remain weak amid slim refinery margins, trade sources said.

Overall trading activity has slowed down this week as most buyers have fulfilled their requirements for the current trading cycle.