DUBAI FUTURES: Weaker oil product margins weigh on sentiment ahead of OSP release

Singapore — Benchmark Dubai crude futures were trading lower midday in Asia Sept. 3, as weaker oil product cracks weighed on sentiment ahead of the release of Middle East crude oil official selling prices.

The October-November Dubai crude futures spread was pegged at 19 cents/b in contango at 12 pm in Singapore (0400 GMT), down from minus 16 cents/b at the 4:30 pm (0830 GMT) Asian market close on Sept. 2, S&P Global Platts data showed. The November-December spread was pegged at 23 cents/b in contango at the same time, lower by 3 cents/b from the previous Asian close.

The spreads eased ahead of the issuance of October OSPs from Middle Eastern producers, including Saudi Aramco, Abu Dhabi National Oil Company and Qatar Petroleum, in the coming days.

"I think nobody wants to buy [Middle East crude] now ... all [are] waiting for [new Middle East] OSPs," a North Asian crude oil trader said.

Weakening middle distillate product cracks, which have been already averaging near multi-year lows, were also weighing on sentiment, traders indicated.

The second-month gasoil swap crack to Dubai swap was assessed at $4.52/b on Sept. 2, down from $4.72/b the previous day. The crack is trending lower than the $5.57/b average in August, which was itself the lowest since May. In May, the crack averaged at a 17-year low of $4.80/b, Platts data showed.

"Demand in China is still at a low level," the trader said, adding that there was little chance of improvement in September.

Narrowing refining margins amid high oil product inventory have caused China's domestic refineries to cut run rates in August, although total crude throughput remained relatively high at 82.8% for state-owned oil companies, data collected by Platts showed Aug. 27.

Reflecting weaker sentiment, November cash Dubai crude versus same-month Dubai futures -- a key indicator of spot market sentiment for sour crude in Asia -- was assessed at a discount of 37 cents/b on Sept. 2, down from 29.5 cents/b the previous day.