Spreads stable for Dubai crude futures as market awaits fresh cues

Singapore — Intermonth spreads for benchmark Dubai crude futures were relatively stable in Asia mid-morning trade July 30, as market participants awaited fresh cues.

The market remains stuck in a contango as margin recovery stays capped, while refineries continue to see ample supply inventories, sources said.

At 11am Singapore time (0300 GMT), the August/September Dubai futures intermonth spread was pegged at a contango of 37 cents/b, narrowing 2 cents/b from the Asia close on July 29, S&P Global Platts data showed.

Meanwhile, the September/October spread was pegged at a contango of 24 cents/b, narrowing 3 cents/b from the previous close.

Owing to tepid uptake, some market participants are hoping for a decrease in new official selling prices next month.

Looking at the deep discounts in the current market, a crude oil trader said July 30 that Middle Eastern producers should ideally cut their OSPs by at least a dollar next month, in order to improve buying interest.

Chinese refiners have been aggressively buying crude oil since the late first quarter to take full advantage of lower oil prices during then, but this has led to more than ample inventories and dampened buying interest.

China's crude stockpiles have reached a record high level in July as refiners struggle to digest mass crude oil cargoes purchased during the second quarter, Platts previously reported.

The high inventory level is expected to dampen China's crude oil demand for delivery in the third quarter.

Meanwhile, domestic fuel consumption had also slowed amid widespread flooding across 23 provinces during the month.

"September [loading cycle] was already a poor month in terms of [Chinese] demand and with the floods situation, run rates are also affected and refineries are likely to produce less," another crude oil trader said.