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Sour crude rangebound as market mulls Aramco IPO, OPEC survey

Benchmark Dubai crude futures spreads and the Brent/Dubai Exchange Futures for Swaps spread were largely steady Monday morning as Asian trading kicked off for the week, while market participants digested updates on the Saudi Aramco IPO alongside the latest OPEC production levels.

Spot trading activity for Middle East crudes has yet to begin, said traders in Singapore.

“Still quiet, no tender details out yet,” said a crude trader.

The January Brent/Dubai EFS was notionally assessed at $3.75/b at 11 am Monday in Singapore (0300 GMT), little changed from $3.72/b assessed Friday evening at 4:30 pm (0830 GMT).

Saudi Aramco, the world’s most profitable company and No. 1 oil and gas producer, plans to start selling its shares to institutional and retail investors on November 17, but has yet to reveal the size and price of the offering, according to its IPO prospectus.

“The targeted percentage of offer shares allocable to individual investors will be up to 0.5% of the shares,” the company said over the weekend. The upcoming IPO could potentially be the world’s biggest, beating Chinese e-commerce giant Alibaba’s $25 billion offering in 2014.

Middle East crude spreads have taken news of the IPO in stride, although the sour crude complex remains bullish in the current month of trading.

The December/January intermonth spread for Dubai futures spread was notionally assessed at $1.29/b Monday morning, little changed from $1.26/b assessed on Friday evening.

Similarly, the January/February spread was pegged at 85 cents/b Monday morning, up slightly from 82 cents/b on Friday.

The $2-$3/b backwardation seen for Dubai crude structure so far in November has more to do with tighter supply fundamentals for medium sour crude this month, despite recovering production within the Middle East bloc, traders told S&P Global Platts.

Saudi Arabia, the largest producer within OPEC, pumped 9.80 million b/d in October, the Platts monthly OPEC production survey found last week, leading the bloc’s total production back to 29.71 million b/d, a 1.26 million b/d rebound from its lowest level since the depths of the global financial crisis in 2009.

But even with its comeback, crude production for the desert kingdom remains well below its quota by some 510,000 b/d and continues to lead the coalition by example.

Saudi officials have pressured other members to improve their compliance ahead of the next OPEC meeting, to be held December 5-6 in Vienna, when the group and its allies, including Russia, will debate the future of their collective output cuts, which are set to expire in March.
Source: Platts

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