Dubai crude futures in rangebound contango as tepid margins weigh

Singapore — The contango for Dubai crude futures was rangebound in Asia mid-morning Aug. 28, as the tepid recovery in cracking margins continued to weigh on the demand outlook for Middle Eastern crude.

Intermonth spreads remained steady to weaker, with the September-October spread pegged at a contango of 35 cents/b at 0300 GMT, widening 4 cents/b from the Asia close on Aug. 27, Platts data showed.

The October-November timespread was pegged at a contango of 21 cents, widening 3 cents/b over the same period.

While some sources noted that the contango has narrowed compared to a week ago, market fundamentals did not show a substantial improvement.

"The market was expecting much worse because the whole sentiment is bearish, demand is bad, margins are weak, people are not really buying," a Singapore-based crude oil trader said.

Cracking margins for transport fuels are weaker on the month amid a resurgence in coronavirus infections in some countries.

Tepid travel demand continues to keep the jet fuel market suppressed, as evidenced by the second-month jet swap crack versus Dubai that averaged 51 cents/b so far in August, plunging from an average of $2.47/b in July.

Lower run rates from Asian refiners could cap demand recovery for the sour crude grades, which could in turn weigh heavier on the market structure.

China's state-owned oil companies -- Sinopec, PetroChina, CNOOC and Sinochem -- lowered their run rates to around 82.8% in August from 83.1% in July, Platts had reported.