November Brent/Dubai EFS retracts on recovering sentiment

The front-month Brent/Dubai Exchange of Futures for Swaps was narrower in midmorning trade in Asia Sept. 10, while the issuance of crude import quotas to Shenghong Petrochemical's greenfield refinery buoyed sentiment for the Middle East sour crude market.

The November Brent/Dubai EFS was pegged at $3.34/b at 11 am Singapore time (0300 GMT), down 15 cents/b from the Asian close Sept. 9, S&P Global Platts data showed.

The market sentiment for Middle East sour crudes may be recovering prior to the beginning of spot trading activity for November-loading cargoes, which is likely to commence in the week starting Sept. 12, sources said.

"Sentiment is recovering, early month was bearish, recent days it has gotten better," said a crude oil trader based in Singapore.

The recovery was partly due to the issuance of 2 million mt of crude import quotas to Shenghong Petrochemical's greenfield refinery, as well as expectations of a fourth batch of quotas to be issued to other Chinese independent refineries, sources said.

"The rest [of the quotas] should probably be end of September, I think," said another Singapore-based crude oil trader.

"PG sour crude [market was] weak last one-two weeks, [partly] due to Chinese refineries lacking the quotas. [Domestic] refinery margin going better ... still awaiting the firm [import] quotas," a trader based with a north Asian refinery added.

Spot activity for the November-loading trade cycle is yet to begin, sources said, as most end-users were awaiting the issuance of term allocations from Saudi Aramco.

The October-November Dubai crude futures spread was pegged at 82 cents/b at 0300 GMT, narrowing 3 cents/b from the 4:30 pm (0830 GMT) Asian market close Sept. 9.

The November-December spread was pegged at 72 cents/b, flat from the previous day's close, Platts data showed.