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DUBAI FUTURES: Crude EFS narrows; West-East arbitrage opportunities persist

  • Author
  • Reetika Porwal
  • Editor
  • Shashwat Pradhan
  • Commodity
  • Oil

Singapore — Front-month Brent-Dubai Exchange of Futures for Swaps narrowed mid-morning on March 31, amplifying the attractiveness of arbitrage crude for Asian buyers.

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The May Brent-Dubai EFS was pegged at $2.20/b at 11 am Singapore time (0300 GMT) on March 31, down 7 cents/b from the Asian close on March 30, S&P Global Platts data showed.

The Brent-Dubai EFS is a key indicator of the spread between light, sweet and heavy, sour crudes, and a narrower EFS makes crude priced against Dubai less economically attractive for Asian refiners compared to Brent-linked ones.

While Brent-Dubai is still wide, it has been narrowing in recent weeks, making arbitrage barrels more viable, sources said.

"The supply-demand balance is very important. Demand in Europe is weak now due to a resurgence in COVID-19, which is pushing the market from the West to the East," said a crude oil trader based in Singapore.

The overhang of arbitrage barrels in the market, especially from West Africa, has resulted in an oversupply of crude in the market, and is likely to be a key consideration when OPEC+ decides on its May production quotas on April. 1.

"There is too much supply from other regions, so OPEC+ and Saudi will likely rollover production cuts. If not, flat prices can fall to around $50+/b," said a trader based with a North Asian refinery.

OPEC+ reportedly lowered its 2021 oil demand growth estimate March 30, further signaling that a conservative approach will be taken in the production quotas for May.

During mid-morning in Singapore, the May/June Dubai time spread was pegged at 63 cents/b, flat from the close on March 30. The June/July Dubai time spread was pegged at 60 cents/b, up by 1 cent/b from the previous day's close.