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Intermonth spreads for Dubai crude futures rangebound amid tepid activity

CRUDE MOC: Dubai structure set to strengthen amid further supply cuts

Singapore — The Dubai cash/futures spread, the key Middle East sour crude market indicator, clocked in its first full week in backwardation on June 5 after being negative since early March, amid a turn in market sentiment as OPEC+ is on the brink of extending its 9.7 million b/d supply cuts to July.

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The spread averaged $0.41/b for the week of June 1-5, Platts data showed. The same spread averaged minus $1.23/b for the week of May 22-29. Most notably, the spread -- closely tracked by Middle East crude traders for cues about spot market sentiment -- staged a significant upward recovery from record lows of minus $9.15/b over April, to an average of minus $2.73/b over May. This is one of the main indicators quoted by respondents to the Platts monthly OSP survey when saying that producers will raise OSPs in the coming days.

Prices are expected to be hiked in Asia by $2/b to $5/b according to the OSP survey. Saudi Aramco is expected to announce its July OSPs shortly after, by June 7, once OPEC+ concludes its meeting to be held on June 6.

Oil prices have rallied in recent days on the likelihood of supply cuts from May and June rolling over into July, with the M1 Cash Dubai outright price up 17% at $40.65/b on June 5 from $34.85/b on May 29.

A backwardated Dubai cash/futures spread may also bring crude stored during contango out from inventories, negating OPEC+ cuts to a certain extent. Another turn in market sentiment is the return of a small premium for light grades like Murban over the medium sour basket. This is expected to widen if gasoline and naphtha demand take off.

Meanwhile, the Platts MOC for Middle East sour crude saw 13 partials change hands for the week of June 1-5, slightly lower from 17 for the week of May 22-29. No cargoes have been shown on the crude cargo MOC yet, as the trading cycle is yet to kick off.

June cash Dubai's discount to the Oman assessment averaged 17 cents/b for the week of June 1-5. This was 8 cents/b for the week of May 22-29. DME Oman averaged a premium of $1.02/b for the week over Platts Oman. For the week of May 22-29 the same premium clocked in at $1.89. There is evidence in the market that the pace of Chinese buying is easing somewhat, as margins are not doing as well as previously.