Brent market structure holds firm ahead of expiry, N.Sea maintenance looms

London (Quantum Commodity Intelligence) – Brent crude oil futures pulled back from 6-weeks highs as concerns over Asian demand resurfaced, but backwardation on the June/July spread held firm ahead of the ICE Brent June contract expiry later Friday.

The June/July Brent futures spread was valued at around +$0.50/b in London afternoon trading (1322 GMT), with North Sea supplies seen tight over the summer period due to heavy maintenance schedules -- particularly the Forties system, which is an integral part of the Dated Brent 'basket' of crudes.

Brent futures for June were trading at $63.37/b, compared to the previous day's settle of $68.56/b, a fall of 1.82% on the day.

Loading schedules for June have Forties output at just two cargoes of 600,000 barrels each in June, said traders, compared to around 15 in a full-production month. Maintenance in the North Sea is conducted during the summer months to avoid adverse winter conditions in the North Atlantic.

Additionally, Quantum reported Wednesday that exports of Brent crude oil from the UK could be disrupted in May after workers at the Sullom Voe terminal on the Shetland Islands, north of Scotland, voted this week to strike.

Middle East benchmarks this week came under strong downwards pressure on fears of demand slowdowns from India, and possibly Japan. Both DME Oman and IFAD Murban futures tipped into contango heading into expiry, while Quantum assessed the Dubai June/July cash spread at parity – all three had been above +$0.50/b earlier in the month.

US benchmark WTI also held relatively firm on the structure with June/July at around +$0.12/b, little changed over the week.

Of the five grades that make up the Dated Brent basket, Forties production is up to 300,000 barrels per day, Ekofisk around 290,000 bpd, Troll 170,000 bpd, Oseberg 135,000 bpd and Brent around 70,000 bpd.

However, volumes regularly fall short of these levels due to maintenance schedules and unscheduled outages.