Dubai crude structure softens despite Middle East conflict escalation

Market structure for Middle East sour crude led by Dubai futures slackened in mid-morning trading in Asia on Monday, despite heightened geopolitical tensions in the region.

Dubai’s discount to Brent on the August EFS (Exchange Futures for Swaps spread) widened as Brent prices moved up in reaction to fresh US sanctions expected to be imposed on Iran Monday.

The August Brent/Dubai EFS rose to $3.10/b at 11 am in Singapore (0300 GMT) from $2.92/b at the close on Friday.

Additionally, Yemen’s Houthi rebels were reported to have attacked an airport in the south of Saudi Arabia, the latest in a string of events that have seen tensions escalate between Iran and the US-Saudi alliance.

But backwardation in the Dubai sour crude structure softened despite the onslaught of events, with the spread between August Dubai cash and swap down to $2.18/b Monday morning from $2.23/b assessed on Friday.

“Geopolitical premium is already baked in for now,” said a trader based in Singapore on Monday.

Crude traders also said there was muted reaction in the sour crude complex following news of the airport attack as it was in the southern part of the country, with minimum exposure to Saudi oil operations.

According to media reports, Houthi rebels had launched an attack on the Abha airport in southern Saudi Arabia on Sunday, killing one person and wounding seven others, quoting the Saudi-led coalition battling the group in Yemen.

This latest attack comes at a time when tensions are already high in the region with US President Donald Trump looking to introduce fresh sanctions on Iran from Monday.

“We are putting major additional sanctions on Iran on Monday,” Trump said in a tweet on Sunday. “I look forward to the day that… sanctions come off Iran, and they become a productive and prosperous nation again – The sooner the better!”
Source: Platts