Brent/Dubai cash spread crunches to two-year low as gasoline cracks crumble
Quantum Commodity Intelligence – The Brent/Dubai cash spread crunched to a two-year low Thursday, as light-sweet grades, including the North Sea benchmark, come under strong downwards pressure on tumbling gasoline cracks.
The Brent/Dubai cash spread for November was assessed by Quantum at $0.22/b, versus $0.84/b in the previous session, although Brent/Dubai has been in decline since peaking at around $5/b in June.
The narrowing spread between the two crude benchmarks has coincided with the sharp reversal in Asian gasoline cracks, which peaked at around +$35/b in June before sliding into a two-month slump
Gasoline refining margins for benchmark 92 RON, measuring the M+1 swap versus Brent, tumbled to around minus $2.50/b Thursday, the lowest level since the pandemic days of 2020.
Demand for road transport fuel has been sluggish over the summer, while China imposing fresh Covid lockdowns this week further jolted market confidence. Weaker European and US cracks also added to the bearish sentiment.
Gasoline-rich grades such as Brent have been heavily hit by the slump, while medium sour grades have found better support from distillate cracks in recent weeks, although gasoil has started the new month on a softer footing.
Brent had also found support over the summer with reduced loading programs that underpinned the Dated Brent benchmark and boosted premiums, but the key Forties grade has recently been best bid at discounts to the underlying Brent swap.
Meanwhile, the Brent/Dubai EFS has improved slightly to around +$6/b, having briefly traded below +$5/b last month. This, however, is a function of the wider Dubai structure, since the EFS includes two months of backwardation.
Both the Brent/Dubai spread and EFS are used by Asian refiners in comparing Dubai-related crude oil versus grades pricing against the North Sea Brent benchmark, and is also used to convert Dubai flat-price exposure to the more-liquid Brent futures contract.
The Dubai 'basket' includes medium sour grades Dubai, Oman, Upper Zakum and Al Shaheen, along with light sweet Murban.
