Middle East crude futures spreads rangebound as cycle nears conclusion

Singapore — Benchmark Dubai crude futures spreads traded amid muted sentiment mid-morning in Asia Tuesday, as spot trading for the April cycle is being wrapped up and market participants prepare for May requirements.

The prompt March/April intermonth spread for Dubai crude futures was pegged at minus 22 cents/b at 11 am in Singapore Tuesday morning, unchanged from its assessed value at the 0830 GMT Asian close on Monday.

Similarly, the April/May spread was pegged at a backwardation of 10 cents/b Tuesday morning, a tad lower compared with Monday's assessment of 13 cents/b.

April trading was characterized by heavy discounts for Middle East sour crude grades sold in Asia, market participants said. Light crude grades such as Abu Dhabi's Murban were mostly concluded at discounts to their respective OSPs.

Qatar's Land crude grade -- sparse quantities of which are available in the spot market each month -- traded in heavy discounts of around 50 cents/b under Platts front-month Dubai crude assessments via a Qatar Petroleum tender, indicative of the sway buyers had over pricing this month, said traders.

Meanwhile, medium and heavy sour crude grades such as Upper Zakum, Qatar Marine and Basrah Light also saw spot market differentials plunge deeply into negative territory for March and April loading cargoes available to buyers.

Soft demand sparked by coronavirus-related economic slowdown, along with seasonal maintenance brought on the spate of discounted cargoes, in addition to the contango in the Middle East crude structure.

The Dubai cash/futures spread was assessed at a contango of 18 cents/b at 4:30 pm in Singapore (0830 GMT) on Monday, and has averaged 7 cents/b month-to-date, Platts data showed.

This is down from a monthly average of $2.11/b for January, a sharp month on month contraction in the structure.

The crude market in Asia is likely to see heavy discounts on official selling prices from Middle East producers next month, in tandem with the fall in the Dubai structure, several traders told S&P Global Platts.

With April trading close to a conclusion, preparation for May requirements are on the cards this week, they added.

Market participants will also keep a close eye on the upcoming OPEC meeting scheduled to be held March 5-6 in Vienna, where Saudi Arabia and its OPEC and non-OPEC allies, including Russia, are expected to discuss the viability of additional production cuts.