Dubai Futures: Prompt month spread firms amid ADNOC’s August cuts

Highlights

July/August Dubai spread hits highest level for the month

ADNOC to cut August term barrels by 5% across all grades

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Singapore
Backwardation for the July/August Dubai crude futures spread firmed late morning in Asia on June 29 to the highest level for the month so far, following reports that Abu Dhabi will be cutting term volumes for August loading by 5% for all of its four export grades.

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The prompt July/August Dubai crude futures spread was pegged at 53 cents/b in backwardation at 11 am in Singapore (0300 GMT) on June 29, up 8 cents/b from 45 cents/b assessed at the 4:30 pm close (0830 GMT) on June 26, S&P Global Platts data showed.

The spreads strengthened for the second consecutive day following reports at the end of last week that Russia slashed exports of Urals crude to the lowest in 10 years.

Market participants said the lower exports of sour crude were providing support to the Middle East sour crude complex.

“Urals supply cut in July [is supporting sentiment],” a Singapore-based crude trader said.

Meanwhile, the UAE’s Abu Dhabi National Oil Co. informed its term customers that it would cut the volume available for export over August by 5% for its more popular Murban and Upper Zakum grades, and for Umm Lulu and Das Blend, a source familiar with the situation told Platts on June 28.

It follows the same 5% cut that ADNOC made for July, although the cut was not as steep as that seen for June term volumes of Murban and Upper Zakum, which had been slashed 20%.

The August/September spread, meanwhile, was pegged lower at 7 cents/b late morning on June 29, down from the multi-week high of a 12 cents/b premium assessed at the Asian close on June 26.

Reflecting the buoyant sentiment for the prompt month, the physical Middle East sour crude market also saw an uptick in its key price indicator at the Asian close on June 26.

The spread between physical cash Dubai against same-month Dubai futures (M1/M3) was assessed at a premium of $1.22/b at the 4:30 pm (0830 GMT) Singapore close on June 26, up 10 cents/b from $1.12/b assessed the day prior, and the highest in over a week.

Elsewhere, Dubai’s spread to ICE Brent futures, or the Brent/Dubai Exchange of Futures for Swaps spread, widened to be pegged at $1.01/b on the morning of June 29, up 26 cents/b from the 75 cents/b assessed at the Asian close on June 26.

August Dubai futures was lower at $39.20/b at 11 am Singapore time on June 29, down 3.9% from the Asian close on June 26, tracking the trend seen in the global oil markets.