CRUDE MOC: Dubai structure hovers near 1-year lows despite price cuts

Singapore — April cash Dubai's premium to futures firmed day on day Wednesday but continued to hover around lows it touched nearly a year ago, even as several producers slashed prices for their crude grades for the latest trading cycle.

The April Dubai cash/futures spread was assessed at 58 cents/b at the end of the Platts Market on Close assessment process on Wednesday, up 6 cents/b from 52 cents/b on Tuesday. The spread was last seen in a similar range in March 2019. Specifically, it was last assessed at 58 cents/b on March 28, according to Platts data.

Middle East producers ADNOC and Qatar Petroleum issued official selling prices for January loading cargoes overnight, with OSP differentials for lighter crude grades cut between 60-90 cents/b month on month and medium sour crude grades Qatar Marine and Upper Zakum down 25-80 cents/b.

Crude traders based in Singapore said they expect the spot price differentials of light crudes to trade at deep discounts this month, despite producers having marked down prices.

Traders of Middle East crude also expect Saudi Aramco and the remaining contingent of sour crude producers to cut their upcoming OSPs over and above earlier calculations due to the sharp fall in crude prices and market structure in recent days.

"Saudi OSP will be much lower than our [initial] expectations," one crude trader based in Singapore said.

The cash Dubai intermonth spread for May/June recovered from 5 cents/b Tuesday to 12 cents/b on Wednesday at 4:30 pm in Singapore (0830 GMT). Earlier this week, market participants had said there was a likelihood the spread could flip into contango with the current freefall in oil prices on fears of sharply weaker oil demand from China, which is grappling with fallout from the rapidly spreading coronavirus.

Meanwhile, benchmark cash Oman's premium to benchmark cash Dubai crude narrowed, with Dubai relatively higher day on day. The April cash Oman/Dubai futures spread stood at 62 cents/b Wednesday, up from 60 cents/b Tuesday. This puts the cash Oman/Dubai spread at 4 cents/b on Wednesday.

Wednesday's Market on Close assessment process saw a total of nine Dubai partials change hands, with Shell and Total on the selling side and Gunvor and Lukoil as buyers. This brings the total partials count for the first three trading days of February to 16.

Under the partials trading mechanism, the seller declares a full 500,000 barrel cargo to the buyer after 20 partials have been traded for the same loading month between the two companies.

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.