DUBAI FUTURES: EFS, intermonth spreads rangebound; bearish sentiment persists

Front-month Brent/Dubai Exchange of Futures for Swaps were rangebound mid-morning on March 22 amid a weakening outlook for May-loading cargoes amid ample arbitrage availability and tepid demand from most North Asian refineries.

The May Brent/Dubai EFS was pegged at $2.27/b at 11 am (0300 GMT) in Singapore on March 22, lower by 4 cents/b from the Asian close on March 19, S&P Global Platts data showed.

The Brent/Dubai EFS is a key indicator of the spread between light, sweet and heavy, sour crudes, and a narrower EFS makes crude priced against Dubai less economically attractive for Asian refiners compared to Brent-linked ones.

While the EFS remains wide, its downwards trajectory signifies the rising viability of arbitrage crudes, especially from West Africa for Asian refiners.

“West African crudes are very distressed as there is a lot of crude there unsold. Even with the wide EFS, sellers can keep adjusting FOB price levels until the arb can come…they need to get rid of it,” said a crude oil trader based with a North Asian refinery.

Meanwhile, demand from Asian refineries was slowing as most have already fulfilled their procurement requirements for May-loading barrels.

Market participants expect that premiums for May-loading sour crude barrels may adjust downward to entice refineries to continue purchasing, resulting in a bearish sentiment developing for the remaining of the trading cycle.

“Just wait and see…if the market goes down they can buy, if not then they won’t do anything,” said the trader.

At mid-morning in Singapore, the May/June Dubai time spread was pegged at 51 cents/b, up by 4 cents/b from close on March 19, the data showed. The June/July Dubai time spread was also pegged at 49 cents/b, up by 5 cents/b from the previous day as well.
Source: Platts