Crude MOC: Plunging Middle East crude structure signals further price correction

Singapore — May cash Dubai's discount to futures sank to new depths at the close of trading in Asia Monday, signaling lower price expectations for Middle East sour crude producers this month.

The May Dubai cash/futures spread -- also known as the Dubai M1/M3 structure and tracked as an indicator of sentiment for Middle East crude -- dropped to minus $1.92/b at the end of the Platts Market on Close assessment process.

The spread had been assessed at minus 46 cents/b Friday, before Saudi Aramco issued official selling prices to Asia with $5-$6/b cuts month on month.

Monday's close brought the spread to the lowest since minus $2.10/b on January 26, 2016, according to S&P Global Platts data.

More cuts inevitable

In Asia, crude oil buyers and traders were watching out for other Middle East crude oil producers to issue OSPs to gauge how prices will stack up against Aramco's record cuts this month.

"For refiners, Saudi is now the reference" against which they will compare every other grade available via term contracts or on the spot market, a Singapore-based crude trader said.

"We are trying to wait and gauge spot market reaction for the time being," a refiner based in Southeast Asia said.

Several refiners said chunky price cuts from producers such as UAE's ADNOC, Kuwait Petroleum and Iraq's SOMO were now a given, with the exact degree the only question remaining.

"ADNOC [grades] could be [cut] about $3-$4/b," a source with a Chinese independent refiner said.

Meanwhile, Monday's Platts MOC for Middle East sour crude saw a single May partial traded for Dubai crude. bringing the total count for partials in March to 22, comprising 20 Dubai and two Oman.

Each partial is 25,000 barrels in size. 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.