Benchmark Dubai crude futures spreads were up a tad in mid-morning trading in Asia on Friday, as crude oil market participants evaluated fresh prices released by Saudi Aramco overnight.
At 11 am in Singapore (0300 GMT), September cash Dubai crude's premium to September futures ticked up to 99 cents/b, compared with 96 cents/b assessed at the close of trading in Asia on Thursday.
Saudi Aramco cut the official selling prices for four of its five crude oil grades loading in August and bound for Asia, the company said late Thursday. Market participants in Asia had by and large expected a cut owing to a slide in sour crude structure month on month between May and June.
August cash Dubai's premium to futures averaged $2/b over June, while in May it had averaged $2.37/b. Aramco is understood to take the changes in the Dubai spreads into consideration when setting its OSPs each month.
Additionally, crude traders said recent improvement in product cracks could spur refiners in Asia to raise run rates and drive a recovery in the sour crude complex for July.
"Margins have improved quite a bit," said one trader based in Singapore adding, "I wonder if refineries would opt to run harder before peak maintenance [season]."
The spread between September Dubai cash and futures slid below $1/b backwardation at the start of the month, hitting a low of 71.5 cents/b on Wednesday, July 3, but jumped to near $1/b shortly after.
Seasonal refinery maintenance in the third quarter is largely expected to dampen buying activity for September and October loading barrels for the Middle East sour crude market, traders said.
However, buying interest emerged for medium sour crude barrels in the Platts Market on Close assessment process Thursday, potentially signaling an uptick in demand for similar grades in the physical spot market.
Thursday's MOC saw two bids for Upper Zakum crude cargoes , with Total and Shell showing bids for September-loading cargoes. Middle East cargoes are typically in 500,000 barrels each. Both bids stipulated September 1-30 loading periods and B/L month pricing terms.
Total moved its bid from an initial premium of 40 cents/b to Dubai at 4 pm in Singapore (0800 GMT), to 85 cents/b at the close of the MOC at 4:30 pm in Singapore (0830 GMT).
Shell also moved its bid gradually up in the thirty-minute period, from a discount of 50 cents/b to minus 25 cents/b at the close. Neither bid saw selling interest as of the close on Thursday.
Platts assessed September Upper Zakum at $61.72/b on Thursday, and at a discount of 20 cents/b to its OSP.
The premium for September cash Dubai over September futures -- often referenced as a proxy for spot market strength for Middle East sour crude -- moved up 24.5 cents/b day on day to 96 cents/b Thursday.
Platts assessed September cash Dubai at $61.72/b Thursday, while September cash Oman was assessed at $62.05/b.
