Dubai crude futures intermonth spreads weaken after cash structure sinks

Singapore — The intermonth spreads for Dubai crude futures were marginally weaker in mid-morning trade in Asia Aug. 12, led by sentiment in the physical market after the cash structure sank on Aug. 11.

The September/October Dubai crude futures spread was pegged at a contango of 40 cents/b at 11 am Singapore time (0300 GMT) Aug. 12, widening 3 cents/b from the Asia close on Aug. 11, S&P Global Platts data showed. The October/November spread was pegged at a contango of 33 cents/b at 0300 GMT, widening 5 cents/b over the same period.

The contango structure widened marginally after the Dubai cash structure sank on Aug. 11, the data showed.

The Dubai cash-futures, or M1-M3, spread fell 31 cents/b on the day to a discount of 61 cents/b at the Asian close on Aug. 11. The spread had been hovering in a rangebound discount, averaging minus 46 cents/b so far in August.

Trade sources said that spot differentials for other sour crude grades are also likely to remain in discount, versus their respective OSPs.

"There is more than enough supply in the market, will still be in discount even if less discounted," a crude oil trader said, with respect to where the market differentials are trending towards.

In particular, demand from Chinese refiners are expected to remain capped amid high inventories and lower run rates.

China's Shandong independent refineries are likely to slash crude runs in August to about 70%, as their refining margins narrowed sharply from June and July, Platts reported earlier.

At least six independent refineries -- with a combined refining capacity of around 16.9 million mt/year -- plan to shut their crude distillation units for maintenance in August, refiners said.