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Global crude slump drags Dubai futures to 14-month low

Singapore — Oil prices continued their overnight descent into Friday morning in Asia, dragging Dubai futures below $50/b for the first time since December 2018 as the demand outlook for the second quarter continues to worsen.

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April Dubai crude futures plummeted below $50/b mid-morning Friday in Singapore, pegged at $49.66/b as of 11 am (0300 GMT). The contract was assessed at $51.16/b at the 0830 GMT Asian close Thursday evening, but opened lower Friday morning following overnight corrections in ICE Brent and NYMEX crude futures, said market participants.

Second-month Dubai futures -- the most active contract along the futures curve for the Middle East sour crude benchmark -- were last under $50/b on December 26, 2018, when they were assessed at $49.04/b, S&P Global Platts records showed.

Global markets, including equity and oil, remain jittery, mainly on coronavirus-related concerns.

Oil market participants shrugged off the prospect of higher demand in the upcoming summer months, as well as various supply constraints on the radar. A recession in crude demand from China and the wider Asian market due to limited economic activity and the throttling of air, land and sea networks seems to have overshadowed other market fundamentals.

Meanwhile, traders of Middle East sour crude busied themselves in preparation for the May trading cycle, which is set to kick off Monday, March 2. Market talk indicated that the first item on the agenda would be to assess demand in the face of likely price cuts from producers in the Persian Gulf.

However, market participants presented a wide range of views in terms of price cut expectations as part of a preliminary survey by Platts on Friday. Views ranged from calls for large cuts in step with big discounts seen in the spot market for April, to improving product margins as a likely rationale for producers to refrain from heavy price cuts.

Second-month product spreads against Dubai futures showed marginal improvement on naphtha and gasoline from January to February, while jet and gasoil were markedly lower as airline demand for fuel plunged due to the coronavirus outbreak.

The April spread for Platts Naphtha FOB Singapore to Dubai futures has averaged minus $4.89/b so far in February, a slight improvement from minus $5.05/b in January. The same spread for 92 RON gasoline rose to $7.60/b in February from $6.66/b in January, while the crack for jet fuel fell to $9.21/b from $12.64/b in January.