The premium of second-month cash Brent to front-month cash Dubai widened to $4.08/barrel Tuesday, the first time the spread has breached $4/b since early-March as a combination of a rising Brent complex and lower fuel oil cracks have weighed on the Asian benchmark.
Tuesday's Brent/Dubai spread of $4.08/b represents a widening of 37 cents/b from Monday. The spread was last wider March 7, when it was $4.16/b. Traders noted the Brent complex having risen steadily in recent days on a combination of various geopolitical concerns including political unrest in Egypt coupled with crude production and export issues in Nigeria, Iraq and Libya.
At Singapore close, the August ICE Brent crude contract was assessed at $109.07/b a rise of 50 cents/b day-on-day and a surge of $8.78/b since June 24.
This rise has also been seen in Dubai, albeit to lesser extent, with front month cash Dubai assessed at $104.30/b Tuesday, a rise of 21 cents/b from Monday and $6.77/b higher than on June 24.
For fuel oil, which is sensitive to the outright price of crude, cracks have slumped in recent days.
On Tuesday the front month fuel oil crack swap basis Singapore was assessed at minus $7.38/b, down 59 cents/b from last Tuesday. These levels are well below the June average of minus $4.15/b.
As the Brent/Dubai spread has widened, traders have been increasingly discussing the potential of moving sour Middle Eastern crude grades out of the region.
One trader at a trading house said that oil major Shell had fixed some Oman crude for August loading to move to the Mediterranean. But a fixture for this voyage has yet to be seen.
"The market is really strong on Brent...it is so strong [Brent/Dubai has] widened out so much [that the] numbers look favorable to move cargoes out," another trader said.
