Brent/Dubai EFS spread flips into premium amid OPEC+ tensions

Singapore — The new prompt August spread between ICE Brent and Dubai crude futures flipped to premium in mid-morning trade in Asia June 1 as tensions between Russia and other OPEC+ members weighed on Middle East crude sentiment, market participants said.

At 11 am in Singapore on June 1 (0300 GMT), the August Brent/Dubai Exchange Futures for Swaps spread, or EFS, was pegged at a premium of 17 cents/b. The spread was last assessed at a discount of 25 cents/b at the Asian close on May 29, S&P Global Platts data showed.

The prompt EFS has been in discount -- implying a relatively weaker Brent compared to Dubai futures -- since early March, when coronavirus-led demand contraction had a deeper impact on European crude markets, pulling Brent down further than Dubai for Middle East crude markets.

However, OPEC+ related rhetoric weakened the Dubai end of the complex on June 1, traders in Asia said, as any threat to production cuts is expected to have a relatively bigger impact on Middle East crude priced off Dubai in Asia.

The new August Dubai crude futures contract ticked up at a slower pace than Brent over the weekend, being pegged at $37.7/b at 11 am on June 1, Platts data showed. This was up 6% from the May 29 assessment at $35.57/b. However, August ICE Brent futures were up 7.2% over the same period to be pegged at $37.87/b at 11 am on June 1.

OPEC+ ministers are considering moving up their meeting to June 4 instead of the previously scheduled June 9-10, so that July nominations can factor in any changes to oil production quotas, according to people familiar with the discussions.

However, Russia, the key non-OPEC partner, has said it sees a balanced market by June or July, indicating potential reluctance to continue reining in output to that extent, though President Vladimir Putin earlier in the week held talks with Saudi Crown Prince Mohammed bin Salman and pledged "close coordination" between their respective energy ministers.

Nominations for term volumes by Saudi Arabia and other key OPEC members are typically announced by the first week of the preceding month.

OPEC, Russia and nine other allies are concluding the first month of their historic accord, which calls for 9.7 million b/d in production cuts for May and June, easing to 7.7 million b/d for the second half of the year, and then 5.8 million b/d for January 2021 through April 2022.