Brent/Dubai spread widens ahead of expiry, Murban structure blows out

Quantum Commodity Intelligence – The Brent and Dubai benchmarks have diverged ahead of the expory of the September contract Friday with a firm Brent contrasting a softer Dubai market, according to Quantum data.

The front-line Brent/Dubai cash spread topped $2/b for the first time in a month on Wednesday, although eased slightly Thursday – rebounding from a 4-month low of $1.22/b the previous Thursday.

Dubai has registered a sluggish performance in the last 10 days, with the September/October cash spread sinking from around +$1.35/b on July 19 to +$0.81/b Thursday.

Over the same period, a perkier North Sea market has seen the cash Brent (BFOE) front spread strengthen from around +$0.60/b to over +$0.80/b, mirroring ICE Brent futures and taking a cue from this month's strong Dated Brent market which has seen physical barrels trading at close to $1/b over the underlying swap.

The relative weakness for the September Dubai market has been attributed the lack of spot buying from Chinese independent refiners, following a government clampdown on the so-called 'teapot' sector which includes slashing import quotas.

However, the biggest mover this week has been Abu Dhabi's Murban crude trading on the IFAD Exchange.

September settled Thursday at $75.38/b, just $0.14/b under ICE Brent futures and the narrowest Brent/Murban spread since the contract was launched at the end of March.

However, the September/Oct backwardation of almost $2/b suggests expiry-linked volatility rather than any fundamental strengthening for light sweet barrels.

At the end of last week, the frontline spread was around +$1.15/b, according to data published by ICE.