The front-month Dubai to Brent exchange of futures for swaps fell Wednesday to its narrowest level since the end of July, as a drop in Brent spreads eased the Western benchmark's premium over Dubai crude, trading sources said.
The front-month EFS was assessed at $4.02/barrel Wednesday, the lowest since July 25, when it was assessed at $4.01/b. In addition, the second-month EFS narrowed to $3.27/b, the lowest since July 13 when it was assessed at $3.20/b.
Concerns over shortfalls in supplies of North Sea crude had widened the EFS in recent weeks, although an easing of backwardation in the Brent market and discussion of a potential stock release are once again narrowing the spreads, sources said.
"All spreads are weaker, Brent more than others, thus the EFS narrows," a trader said.
"I am watching the market collapse, all Dubai spreads, Brent spreads, the EFS is going down," another trader said.
In the Brent market, the spread between October and November ICE Brent futures narrowed to 35 cents/b at the market close in Singapore, compared with 52 cents/b on Tuesday.
The Dubai intermonth swap also saw a narrowing, with the September to October intermonth swap assessed at 61 cents/b, a fall of 2 cents/b compared with Tuesday.
The EFS enables holders to exchange their ICE Brent futures positions for Dubai crude swaps.
