Frontline cash Dubai crude rose to its highest against the same-month Dubai swap in over three months Monday as demand for medium, heavy sour crudes was expected to remain supported on the prospect of the OPEC output cuts could be more apparent to Asian refiners in the second quarter.
The April cash Dubai was assessed at a discount of 6 cents/b to April Dubai swaps Monday, compared with a discount of 12 cents/b Friday, S&P Global Platts data showed.
The spread was last higher on October 31, 2016 when it was assessed at a premium of 9 cents/b.
During the Platts Market on Close assessment process Monday, Shell was seen bidding for April cash Dubai partials and it traded with Reliance Global at $55.29/b at the end of the MOC.
“Obviously medium and heavy sour is well supported, but light sour and sweet seems to be plenty around,” a Singapore-based crude trader said.
Intermonth Dubai crude swaps spreads have also largely remained supported Monday after hitting multi-month and multi-year highs on Friday.
March Dubai crude swaps were assessed at parity to April crude swaps on Monday, while the spreads between April/May and May/June were both assessed in a contango of 2 cents/b, Platts data showed.
On Friday, the March/April crude swaps spread was assessed in a backwardation of 2 cents/b Friday — the highest since September 30 last year when it was in a backwardation of 10 cents/b, the data showed.
The April/May and May/June crude swaps spreads were both assessed at a contango of 1 cent/b on Friday, the highest since August 31, 2016 and August 14, 2014 respectively.
Traders have said the stronger spreads reflected expectations that OPEC-related production cuts would be felt most acutely in the second quarter as producers look to comply by June 30.
Also reflecting support for the medium, heavy crude market, cash Oman crude was assessed at 56 cents/b above cash Dubai crude on Monday, the highest since December 30, 2016 when it was assessed at a 70 cents/b premium, Platts data showed.
The rise in Dubai crude has narrowed the crude’s spread to benchmark Brent sweet crude, opening up options for end-users to seek competitively priced grades from outside the Middle East.
The second-month Brent/Dubai Exchange of Futures for Swaps — which enables holders of ICE Brent futures to exchange a Brent futures position for a Dubai crude swap — was assessed at $1.42/b Monday, down from $1.54/b last Friday.
The second-month EFS averaged $1.65/b in January, the lowest since September 2015 when it averaged at $1.54/b.