Benchmark cash Dubai sank to a new record low Wednesday, the first trading day for April, with the Middle East sour crude market under severe pressure amid producer aspirations to maximize oil output in the coming months.
Receive daily email alerts, subscriber notes & personalize your experience.Register Now
April 1 also marks the first day after the end of a long-standing production control agreement between OPEC and nine other allied producer-nations that has been in place with various quotas since 2016.
June cash Dubai, the new front-month contract, plunged to a discount of $7.96/b against June Dubai futures, a new record low for the contract. Front-month cash Dubai's discount to futures was previously lower in March, when oil demand declined rapidly, leading to several million barrels of excess Middle East crude in the May spot market.
The Dubai cash/futures spread declined steadily over the month of March, with its last lowest point seen on Tuesday, March 31, when the contract was assessed at minus $6.04/b.
But the depths touched by the spread Wednesday underscore the degree of excess supply yet to flow into Asia, according to market participants, who also pointed out that the majority of this is expected to be volumes of lighter crudes used for refining transport fuels such as gasoline, jet and diesel.
The June cash Murban assessment also sank to a new record against June Dubai futures, being assessed at minus $7.13/b Wednesday. Murban, a light sour crude grade with an API of 40, constitutes more than half of the UAE's 3.4 million b/d crude production.
The Murban quality premium for June-loading barrels has been set at $0.6376/b and will be effective for delivery of a cargo of Murban crude oil into a physical convergence of Dubai, Al Shaheen, Upper Zakum or Oman partials during the Platts Market on Close assessment process in April.
The minimum threshold for the quality premium has also been raised from 25 cents/b to 50 cents/b effective April 1, meaning that a QP of $0.00/b will be announced if 60% of the observed price difference between the Platts Murban and Oman assessments during the prior month is less than 50 cents/b.