Dubai futures contango eases on lower Sep OSPs, but outlook remains bearish

The contango in Dubai crude futures intermonth spreads eased in mid-morning trade Aug. 7 after Saudi Aramco lowered its official selling prices to Asia for September, but the news was outweighed by the bearish outlook, sources said.

The September/October Dubai crude futures spread was pegged at a contango of 33 cents/b at 11 am Singapore time (0300 GMT) Aug. 7, narrowing 6 cents/b from the Asia close the day before, S&P Global Platts data showed.

The October/November spread was pegged at a contango of 25 cents/b, narrowing 5 cents/b over the same period.

“Structure is likely to improve slightly after they [Saudi Aramco] lowered their OSP, but the market will still be in a contango. The demand outlook is not improving,” a Northeast Asian refinery source said.

Saudi Arabia in a notice Aug.6 lowered its September OSPS for term crude supplies to Asia, setting the Asia OSP for Arab Super Light and Arab Extra Light at premiums of $2.05 and 70 cents/b to the Dubai/Oman average, down 60 cents/b and 50 cents/b, respectively, from the month before, and dropping its Arab Light and Medium prices by 30 cents/b from August to a premium of 90 cents/b to the Dubai/Oman average. Arab Heavy OSP was set at 60 cents/b over the Dubai/Oman average, a drop of 30 cents/b on month.

The decline was unlikely to spur a marked uptick in demand as refiners continue to struggle with suppressed product margins, sources said.

October cash Dubai was assessed at a discount of 62 cents/b to same-month futures Aug. 6, falling 11 cents/b day on day, Platts data showed.

Reflecting bearish fundamentals, the Dubai cash/futures spread has trended even lower since end July, when it stood at a discount of 5 cents/b on July 30, the data showed.

Source: Platts