The intermonth spreads for benchmark Dubai crude futures narrowed in mid-morning trade in Asia on July 17 as extended weak demand and expectations of rising supply in August continued to weigh on sentiment.
The August/September Dubai futures intermonth spread was pegged at 3 cents/b backwardation at 11 am Singapore time (0300 GMT), narrowing 9 cents/b from the previous Asian close, S&P Global Platts data showed.
The September/October spread slipped into a contango of 5 cents/b at 0300 GMT from a backwardation of 2 cents/b at the Asia close July 16, the data showed.
Spot differentials in the sour crude oil market have slumped following a hike in official selling prices by Middle Eastern producers earlier in July.
Supply is also expected to increase from August after OPEC+ members on July 15 agreed to roll back a 9.7 million b/d production cut imposed in May to 7.7 million b/d in August as planned, despite talk the deeper cut may be extended as the coronavirus pandemic continues to weigh on global demand.
The rolling back of the cut was unlikely to result in an immediate rise in crude throughput and oil products output due to the fragility of the global fuel demand recovery, market sources said.
Reflecting weaker physical market sentiment, the cash/futures spread for Dubai crude narrowed sharply July 16. The M1/M3 spread was assessed at a premium of 74 cents/b at the Asia close, narrowing 44 cents/b, or 37% from the day before.
"Chinese refinery demand is still sluggish," a Singapore-based trader said, adding that oil supply remained ample.
