CRUDE MOC: Dubai cash/futures spread retracts from 7-week high as demand eases

New York — Benchmark cash Dubai fell from a seven-week high against Dubai futures on Oct. 26 amid easing demand from Asian refiners towards the end of the December-loading trading cycle for Middle East crude.

December cash Dubai crude was assessed at a discount of 49 cents/b to same-month Dubai futures at the 4:30 pm (0830 GMT) Singapore close on Oct. 26, down 10 cents/b from minus 39 cents/b assessed on Oct. 23, S&P Global Platts data showed.

The cash Dubai/Dubai futures spread, also known as the M1/M3 spread, is a key indicator of spot market sentiment for sour crude in Asia.

The M1/M3 spread on Oct. 23 was the highest since Sept. 4 when it was assessed at minus 34 cents/b, Platts data showed.

Similarly, Platts cash Oman versus Dubai futures spread fell from a 12-week high of 9 cents/b premium on Oct. 23 to minus 11 cents/b on Oct. 26, the data showed.

Market participants indicated that trading activity has calmed down following the flurry of purchases from Asian refiners last week, which saw spot purchases from China, India, Japan and Taiwan.

"[The Middle East sour crude market has been] very quiet since late last week," said a Singapore-based crude oil trader.

Meanwhile, a narrower Brent/Dubai Exchange of Futures for Swap on Oct. 26 could also cap any further appetite for Middle East crude oil.

The Brent/Dubai EFS, an indicator of North Sea low sulfur crude's value versus Middle East high sulfur crude, was assessed at 23 cents/b at the Asian close on Oct. 26, 15 cents/b narrower than the 38 cents/b assessed on Oct. 23.

The EFS narrowed as a build-up in floating storage of North Sea grades, amid a slowdown in European refining activities due to weaker product demand, and the return of crude oil production from Libya, which produces low sulfur crude, weighed on the Brent crude oil complex..

In the Platts Market on Close assessment process in Asia on Oct. 26, four 25,000-barrel partials of December Dubai were traded, bringing the total number of partials traded in the MOC in October so far to 72, comprising 70 Dubai partials and two Oman partials.

Only one convergence cargo has been declared in the MOC in October to date. This consists of a December-loading cargo of Qatar's Al-Shaheen crude oil that was declared by Unipec to Mercuria on Oct. 19.

A convergence occurs when 20 partials are traded between two counterparties, resulting in a full, 500,000-barrel physical cargo being declared from the seller to the buyer.

For Dubai partials, the seller has the option to deliver a Dubai, Oman, Upper Zakum, Al-Shaheen or, with a quality premium, Murban cargo to the buyer.