Dubai backwardation firms, Brent/Dubai EFS soars to 6-week high
Quantum Commodity Intelligence - Benchmark Dubai prices rallied to seven-week highs Tuesday as focus returned to the supply side, while both the Dubai market structure and the Brent/Dubai EFS also raced to the highest levels since late March.
Dubai cash for July delivery was assessed at $110.80/b on 17 May (1630 Singapore time), a gain of $4.15/b versus the previous Singapore close on Friday and the highest price since 25 March, according to Quantum data, as the squeeze on Russian barrels and shortfall in OPEC+ production underpinned market sentiment.
According to Quantum data, the key M1/M3 (Jul22/Sep22) Dubai cash spread, closely monitored by National Oil Companies, was assessed at $5.75/b, also the highest since late March, which traders said was an early indication that NOCs would increase Official Selling Prices for July, having reduced prices sharply for June-loading cargoes.
Meanwhile, the one-year Dubai forward structure was up over $3/b on the day, crossing $20/b for the first time since late March as backwardation strengthened along the curve.
In early March, the M1/M3 spread surged to a record of more than $15/b, while the 12-month curve topped $30/b, reflecting concerns at the time over Russian supplies and a possible oil embargo after Moscow ordered the invasion of neighbouring Ukraine.
The one-year Brent curve Tuesday was assessed by Quantum above +$20/b at the Singapore close, also the highest since late March.
Meanwhile, the Brent/Dubai EFS rallied to a six-week high of $9.67/b, reflecting the wider M1/M3 spread built into the EFS, while the Brent/Dubai cash spread measuring like-for-like July-loading barrels widened to around $4/b.
The EFS is a key metric in comparing Dubai-related crude oil versus grades pricing against the North Sea Brent benchmark and is used in arbitrage calculations for Asian imports.
The spread reflects North Sea light sweet crude versus medium sour crude in the Middle East and is also used to convert Dubai flat-price exposure into the more-liquid Brent futures contract.
