Brent/Dubai cash spread hits 5-mo high ahead of Russian sanctions
Quantum Commodity Intelligence - The Brent/Dubai cash spread soared to a five-month high Tuesday amid fears over a European supply crunch as looming sanctions against Russia boosted the North Sea benchmark versus the key Middle East marker.
Quantum assessed the Brent/Dubai cash spread for January at $5.45/b on Tuesday at the 1630 Singapore market close, the widest spread since late May when the then front-line Jul22 spread topped $7/b.
On an outright basis, Dubai cash for January delivery was assessed at $92.30/b, while Brent was valued at $97.75/b.
Further out, the Feb23 spread was pegged at $6.35/b and Mar23 around $6.50/b, according to Quantum data, indicating the market sees the wider spread as a feature for next year.
The widening spread marks something of a turnaround, as Brent/Dubai trading during September regularly posted negative values, while averaging under $1/b in the first half of October.
EU sanctions on Russian crude kick in from 5 December, while US Deputy Treasury Secretary Wally Adeyemo is in Europe this week to discuss the sanctions on Moscow and the implementation of what is likely to be a fixed-price cap on Russian crude exports rather than a floating-price mechanism.
Uncertainty over Russian supplies is seen as lending support for oil markets, as Moscow said it would not supply nations operating within the price cap.
OPEC+ cuts
The relative fall in Dubai values comes despite the headline OPEC+ production cut of 2 million bpd, of which the Middle East will make almost all of the actual 1 million bpd cuts for November and beyond.
Traders said sluggish growth from China amid the ongoing zero-Covid policy continues to cap demand from the world's largest crude importer.
Meanwhile, the Brent/Dubai EFS for Nov22 was trading at around $9.50/b, its highest level since early August, further flagging a stronger Brent complex in relation to its Middle East counterpart.
A wider EFS typically makes Middle East crude and other grades pricing against Dubai (or Dubai/Oman) more attractive to Asian refiners.
In contrast, Dated Brent-related crudes, such as those from the North Sea, the Americas or West Africa, become more expensive.
Dated Brent premiums have also improved this month, with the North Sea Forties grade bid in excess of Dated swaps +$1/b, compared to discounts to the underlying swap last month.
