The absence of a firm decision on fresh OPEC+ supply cuts emerging from the three-day technical committee meeting in Vienna saw another round of selloffs in global crude oil markets overnight, resulting in a contango in the Dubai crude futures complex and the Brent/Dubai EFS spread hitting an 11-month low in Friday morning trade in Asia.
The Dubai crude futures’ prompt March/April intermonth spread was pegged at minus 4 cents/b at 11 am in Singapore (0300 GMT) Friday after several days of flirting with, but not quite, falling into negative territory.
The spread was assessed at 8 cents/b the 0830 GMT close of trading in Singapore on Thursday and was last in contango more than a year ago at minus 3 cents/b on January 10, 2019, according to S&P Global Platts records.
Brent crude futures spreads flipped into contango earlier this month, foreshadowing the move for other crude benchmarks, market sources said.
Saudi-led efforts to implement deeper crude output cuts to tackle the coronavirus’ impact on the market remained in limbo late Thursday, with key ally Russia not yet on board with a proposal for 600,000 b/d in new supply curbs.
A technical committee of delegates advising a 23-country oil producer alliance issued the recommendation after three days of intense negotiations at the OPEC secretariat, but delegates said Russian representatives in the talks asked to return to Moscow for consultations with their leaders.
Earlier Thursday, Russian energy minister Alexander Novak said he was not ready to commit to any production changes.
Brent futures fell Thursday night, resulting in the April Brent/Dubai Exchange Futures for Swaps spread tightening to an 11-month low of 64 cents/b Friday morning in Singapore, as Asian markets digested the news and the subsequent impact on Middle East crude trading.
The Brent/Dubai EFS was last lower at 57 cents/b on March 14, 2019, Platts data showed.
Forward month Dubai crude futures spreads also opened lower in Asia Friday, as did forward-month Brent/Dubai EFS spreads.
The April/May Dubai crude futures spread was pegged at minus 1 cent/b Friday morning, down from 12 cents/b at Thursday’s close.
Spot trading for April-loading cargoes that is expected to pick up next week in Asia is largely a buyers’ market at the moment, crude traders said.
The market has plenty of supply options as demand from China takes a hit from lower refinery run rates and easing travel and transport fuel requirements.
The arbitrage from the North Sea and US has also opened up on sliding freight rates, increasing downward price pressure for sellers in Asia.
The OPEC+ committee’s recommendation calls for 600,000 b/d in additional cuts to begin in April and run through June. It does not parcel out how the cuts should be shared, sources said.
With no imminent action pending, OPEC+ ministers have kept their March 5-6 meeting in Vienna as scheduled rather than moving it forward. Any deal would require the unanimous approval of the OPEC+ coalition members, composed of OPEC, Russia and nine other allies.
Source: Platts
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