DUBAI FUTURES: Front-month backwardation widens amid Indian buying spree

Singapore — Backwardation in the benchmark Dubai crude futures intermonth spreads remained widened at mid-day in Asia on Dec. 9 as India's demand for crude oil showed no signs of slowing down.

At mid-day Singapore time (0400 GMT) on Dec. 9, the January/February spread was pegged at 14 cents/b, 2 cents/b wider from the Asian close on Dec. 8, S&P Global Platts data showed.

The February/March spread was pegged at 3 cent/b, 1 cent/b wider from the assessment the previous day.

Indian demand continues to emerge indicating that the hunger for crude oil imports is on an increasingly upward trend.

IOC was heard to have issued fresh tenders for additional purchases of various crude grades for end-February and early March arrival. Both tenders close Dec. 10.

"This is some serious demand from India. It's good for the market but as buyers makes it difficult for us. So much buying makes sellers bullish and pushes prices upwards," said a trader with a North Asian refiner.

This is in addition to the purchase of two-million barrels of February-delivery Nigerian crude during the week ended Dec. 5 and 4 million barrels of Middle Eastern crude from oil majors Total and Exxon earlier in the week.

In the tender earlier in the week, IOC purchased three million barrels of Abu Dhabi's Upper Zakum crude and one million barrels of Murban crude, all of which are scheduled for February delivery.

"Actually, IOC may have not paid a lot for these cargoes. Both were end Jan. loading and bought just before OSP issuance, so IOC may have got a good deal on these," said a trader in Singapore.

Indian demand was expected to lead the way for the February-loading barrels along with other Asian buyers namely China, South Korea and Japan.

As India continues to reduce coronavirus cases, uptick in economic activity across the country has increased demand for the crude-oil imports dependent country.

Activity during the week has largely centered on the Indian purchase tenders as the outcome of the Mangalore Refinery Petrochemicals Ltd. for purchase of one-million barrels of high sulfur crude is awaited. The tender closes Dec. 9 with validity until Dec. 11.

India's third largest refiner, Hindustan Petroleum, purchased one-million barrels of Mars crude for January/February arrival through a tender that closed during the week ended Dec. 5.