Singapore — The prompt intermonth spread for benchmark Dubai crude futures flipped into backwardation from months' long contango during morning trade in Asia Thursday, amid firm demand for Middle East crude cargoes in the spot market this month.
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Register NowAt 10 am in Singapore (0200 GMT), the June/July Dubai spread was pegged at plus 2 cents/b, up from minus 6 cents/b assessed at the 4:30 pm close (0830 GMT) Wednesday.
The spread was seen bid and offered on the Intercontinental Exchange at 0 cents/b and 9 cents/b, respectively, at the same timestamp.
The prompt M1/M2 spread briefly flipped into backwardation two weeks ago, when it was assessed at plus 14 cents/b on May 14, Platts records showed. However, it flipped back into contango quickly after being assessed at minus 1 cent/b the following day. It remained negative up until Thursday morning.
Still, the prompt spread's erratic forays into backwardation is a sign that the Middle East sour crude market is firming on the back of OPEC+ supply cuts to Asia, and oil demand that is slowly resurfacing after nearly decimating due to the coronavirus pandemic, crude market participants noted.
The spot market in Asia has seen price differentials for Middle East grades such as Murban, Upper Zakum and Basrah Light crude trade in firm premiums, a switch from deep discounts last month, they added.
Most recently, Taiwan's CPC and Thailand's PTT were seen picking up July loading cargoes of Upper Zakum and Murban at premiums of around $1.50/b to their respective official selling prices, traders told Platts midweek.
Russian ESPO Blend prices have also rallied this month, going from discounts traded in April to premiums in the range of $3/b to $3.50/b over Platts front-month Dubai crude assessments.
But whether market sentiment stays positive depends in large part on the pace of demand recovery, and also on continued efforts from Middle East producers to restrain exports to the region, traders said.
Further along the curve, intermonth spreads for Dubai crude futures are still hovering in firm contango, with outlook for crude demand not yet convincing enough for spreads to flip into backwardation just yet, they added.
The July/August Dubai crude futures spread was pegged at minus 46 cents/b at 10 am in Singapore (0200 GMT). This was a cent lower than its assessment at minus 45 cents/b on May 27 at 4:30 pm, Platts records showed.
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May 28, 2020 at 09:39AM
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Prompt Dubai spread flips to backwardation amid firm spot demand - S&P Global
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