Dubai spreads ease despite firming spot market price sentiment

Singapore — Benchmark Dubai crude futures were steady to a touch lower midmorning Friday in Asia even as activity heated up in the Middle East sour crude spot market Friday, with several new deals and tender results reflecting tighter sentiment.

At 11 am in Singapore (0300 GMT) Friday, the June/July Dubai futures spread was pegged at 6 cents/b, narrowing from 14 cents/b assessed Thursday. On a similar note, the July/August spread ticked lower to be pegged at minus 16 cents/b Friday, from its assessment of minus 7 cents/b on Thursday.

While edging down day on day, the spreads were up considerably from the start of the week. On Monday, the June/July spread had been assessed in contango at minus 80 cents/b while the July/August spread had been down at minus 74 cents/b, showed Platts data.

Meanwhile, in the spot market for June and July loading cargoes, sentiment firmed quickly following fresh deals conducted overnight.

Several cargoes of June loading Basrah crude were reportedly sold into China at premiums ranging from $4/b to $5/b over the official selling price. Basrah crude traders based in Asia said the high uptick from recently traded levels was likely due to cuts in monthly crude allocations from producers, such as Saudi Aramco and Iraq's State Oil Marketing Organization, which were in the process of being finalized with their customers across Asia this week.

Earlier this month, at least three Basrah Light cargoes had fetched premiums of around $2/b to $3/b in the spot market.

Meanwhile on Friday, market sources reported that Saudi Aramco had informed at least one Japanese refiner of a cut in its June loading crude allocations by 20%-40%.

"We had cuts across grades, with larger cuts in heavier grades," said a source with the refiner, adding that the company is slightly cautious for a possible uptick in domestic oil demand following the partial lifting of COVID-19 emergency Thursday.

Elsewhere, traders were awaiting confirmation of results from Qatar's monthly crude tender, an important indicator for the state of the spot market.

Initial reports indicated that the two Al-Shaheen cargoes offered in the tender may have been awarded at discounts of around $2.70/b to Platts July Dubai crude futures. Comparatively, Platts July cash Dubai was assessed at a discount of $3.13/b to July futures on May 13, the tender closing date.