Benchmark Dubai front spread narrows sharply, loses ground to Brent
Quantum Commodity Intelligence - Benchmark Dubai crude hit a one-month high Tuesday in terms of outright price, but on a structural basis the Asian marker crude continued to soften, while also losing ground against North Sea Brent.
Dubai cash for February delivery was assessed at $76.45/b on December 28 (1630 Singapore time), up $2.14/b from Friday's Asia close, the highest assessment since November 26 when the Omicron variant initially emerged, sending oil prices crashing lower.
However, a sluggish finish to the month and an overhang of medium sour crude has helped to narrow the front-month Dubai spread to an eight-month low.
The Feb22/Mar22 retreated by around $0.6/b on the previous close to $0.08/b, according to Quantum data, the lowest spread since the final week of April when Jun21/Jul21 briefly narrowed to parity.
Prior to Tuesday, the Feb22/Mar22 spread had averaged more than $1/b this month and was trading at around $1.50/b in the first week of December.
Likewise, the M1/M3 spread (Feb22/Apr22), which is closely monitored by National Oil Companies in the Middle East for setting Official Selling Prices (OSPs), also narrowed to an eight-month low of $0.75/b.
Overhang
The relatively weak finish to the year for Dubai was blamed on a slight overhang of unsold barrels, with Oman currently the setting the price as the lowest of the five Dubai 'basket' grades, made up of Dubai, Oman, Upper Zakum, Al Shaheen and Murban.
Brokers said another Oman cargo was delivered into the Platts Dubai partials market Tuesday, the fourth of the month, which is usually a sign of sluggish spot demand as Oman is a popular grade, particularly among Chinese refiners.
February Cash Brent (BFOE) was assessed $79.00/b at 1630pm Singapore time, up $3.01/b on the previous-Asia cash close, lifting the February cash Brent/Dubai by over $0.80/b to $2.55/b, the widest since late September.
While Brent has found support from the outages in Libya and Nigeria, the wider Brent/Dubai spread was seen primarily as a function of the weaker Dubai market.
Meanwhile, the February EFS was also firmer at a one-month high $3.30/b, which in turn makes Brent-related crudes more expensive for Asia refiners.
