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Mideast Crude Watch-Dubai spread at parity; Jan trade firm

This is the second time Dubai reached parity level this week

November 12, 2010 12:15 by

The front-month November/December Dubai intermonth spread touched parity level on Friday, remaining the strongest in 16 months, signalling robust prompt demand for Middle East crude, traders said on Friday.

This is the second time it reached parity level this week. December/January Dubai spread also firmed to an 8-cent contango, while January/February spread strengthened to an 11-cent contango.

January-loading Middle East cargoes started trading this week at much stronger differentials than December-loading lots on robust demand, even as Gulf countries raised their official selling prices (OSPs) to Asia to multi-month highs.

Strong crack spreads for naphtha and middle distillates, coupled with expected peak winter demand for heating oil, have boosted the market for all grades of crude in recent months.

Traders said if the strength persisted — especially with China cutting diesel exports to meet higher utility demand — they would not rule out the possibility of the market making the unusual flip into backwardation.

Oman value on the Dubai Mercantile Exchange (DME) rose to around a 15-cent discount to Dubai quotes on Friday, improved from a deep discount of around $1.50 in early August.

Abu Dhabi flagship Murban crude for January-loading was sold to Japan at a premium of around 40 cents a barrel to ADNOC, versus a premium of around 15 cents fetched for first December Murban cargo sold last month, traders said.

Heavy sour crude also jumped despite weak fuel oil cracks. Qatar al Shaheen crude for January-loading was sold at nearly parity to Dubai quotes, up from a discount between 60 and 70 cents a barrel fetched for first al Shaheen crude moved last month.

Top oil exporter Saudi Arabia said this week it would supply full contracted volumes of crude oil in December to Asian term buyers, steady with November levels as expected.

But it will supply fewer heavier and more lighter grades to one major Asian buyer next month, even though it will keep the total supply steady from November at nominated volumes, which also offered support to heavier grades.

The front-month Brent/Dubai Exchange of Futures for Swaps (EFS) for December remained wide at $2.63 a barrel. The high EFS value may curb the flow of Atlantic Basin grades into Asia.

(Reporting by Judy Hua; Editing by Ramthan Hussain)

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