Benchmark Dubai crude future's discount to ICE Brent narrowed in mid-morning trade in Asia Tuesday as demand for Middle East sour crudes began picking up for January.
At 11 am in Singapore (0300 GMT), the January Brent/Dubai Exchange Futures for Swaps spread or EFS was notionally pegged at $3.48/b, down from $3.63/b assessed at the close of trading in Asia Monday.
The EFS is used by crude traders as an indicator of the premium of Brent-linked low sulfur crudes over Dubai-linked high sulfur grades. A narrower EFS indicates a stronger high sulfur crude complex.
Crude traders in Asia expect high sulfur, or sour crude grades originating from the Persian Gulf, as well as Russia's ESPO -- which is priced off Platts front-month Dubai crude assessments -- to fetch premiums in spot market trading this month. The market is trading cargoes loading in January over November.
Dubai intermonth spreads, which typically move down if the EFS narrows to adjust for the additional strength in sour crude pricing, actually strengthened overnight, adding to bullish momentum for Dubai-linked grades.
The December/January Dubai futures spread was pegged at $1.31/b at 11 am in Singapore Tuesday, after being assessed at $1.27/b at 4:30 pm (0830 GMT) at Monday's close in Asia.
Similarly, the January/February spread tracked up to 89 cents/b backwardation Tuesday morning, after being assessed at 85 cents/b Monday.
Spot market activity kicked off Monday with the release of two tenders by India's IOC, both seeking a variety of crude grades. One tender stipulates that the awarded grades will be priced against Platts Dated Brent crude assessments, while the other is seeking a variety of sour crudes from the Middle East as well as the US, to be priced against Platts front-month Dubai crude assessments.
Both tenders close Thursday, November 14.
