DUBAI FUTURES: Brent/Dubai EFS widens on vaccine news but fundamentals unchanged

Singapore — The Brent/Dubai Exchange of Futures for Swaps widened to over two-week high at mid-morning in Asia on Nov. 10 as the Brent crude complex was buoyed by reports of a breakthrough in COVID-19 vaccine research.

The EFS was pegged at a premium of 28 cents/b at 11 am Singapore time (0300 GMT) on Nov. 10, surging 21 cents/b from the assessment of 7 cents/b premium at the 4:30 pm Asian close on Nov. 6, S&P Global Platts data showed.

The EFS is often tracked as an indicator of North Sea low sulfur crude value versus Middle East high sulfur crude, and a wider EFS makes crude priced against Dubai more economically attractive compared to Brent-linked ones.

Oil prices have moved sharply higher overnight after news from Pfizer and BioNTech that their COVID-19 vaccine had shown itself to be more than 90% effective in a phase 3 trial.

January ICE Brent was pegged at $41.99/b at mid-morning in Asia on Nov. 10, 41 cents/b down from the over two-week high of $42.40/b settlement on Nov. 9.

With the EFS at 28 cents/b, the January Dubai futures came to $41.71/b at 11 am Singapore time on Nov. 10.

Market participants noted that they expect the EFS to ease again in the coming days as European refining margins remain weak on the back of the second wave of lockdowns, while crude oil supplies were ample in the region.

"Brent flat price surged but [I] don't feel it will remain there for long time [as] fundamentals did not change," said a North Asian crude oil trader.

Meanwhile, Dubai futures spreads strengthened at mid-morning in Asia on Nov. 10 following the release of official selling prices from Iraq and Abu Dhabi overnight.

The December/January spread was pegged at minus 9 cents/b at 11 am Singapore time on Nov. 10, 4 cents/b higher from the assessment at the Asian close on Nov. 9, Platts data showed.

The January/February spread was pegged at minus 19 cents/b at mid-morning on Nov. 10, 5 cents/b higher from Nov. 9 assessment.

Market participants were digesting the fresh sets of OSPs from Iraq's State Oil Marketing Organization and Abu Dhabi National Oil Company, which largely have raised their December OSPs from November.

"Given these OSPs, Middle East [crude] should trade well for January [loading barrels]. Key is the demand side [and] how much refiners can take - spot might be quiet as really with these OSPs buyers should be looking to take as much term as they can," said a Singapore-based crude oil trader.