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Rangebound contango seen for Dubai crude futures after recent market collapse

The market structure for Dubai crude futures was in a rangebound contango on July 29 in Asia mid-morning trade, as sentiment steadied for now after a collapse seen in the physical market a day before.

At 11am Singapore time (0300 GMT), the August/September Dubai futures intermonth spread was pegged at a contango of 35 cents/b, narrowing 2 cents/b from the Asia close on July 28, S&P Global Platts data showed.

The September/October spread was pegged at a contango of 25 cents/b, narrowing 3 cents/b from the previous close, the data showed.

Prompt intermonth spreads for Dubai crude futures have flipped from backwardation to contango since mid-July, reflecting weaker fundamentals in the market.

The cash differential for Dubai crude also flipped into a discount on July 28, with cash/futures (M1/M3) spread assessed at minus 20 cents/b at the Asia close on July 28.

The Dubai cash/futures spread was last seen at a discount on May 29, 2020, Platts data showed. The spread averaged plus 80 cents/b in July so far, dipping from an average of plus 84 cents/b in June.

In response to the collapsing spread, some market participants have noted that this could lead to a decrease in the next round of official selling prices.

The Dubai cash-futures spread is tracked closely by Middle Eastern producers to define the core direction and extent of price hikes or cuts. Focus this week remains on evaluations on the next round of official selling prices.

Meanwhile, the September Brent/Dubai Exchange of Futures for Swaps was pegged at 21 cents/b as of 0300 GMT on July 29, widening 10 cents/b from the previous close.

September Dubai crude futures were lower in mid-morning trade Asia on July 29 amid a bearish backdrop, while Brent crude futures edged slightly higher after an unexpected drawdown in US crude inventories, Platts earlier reported.
Source: Platts

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