The front-month cash Brent/Dubai spread has sunk by close to $3/barrel in the last two trading sessions to a six-month low after Brent slumped following news of the International Energy Agency's decision to release emergency oil stocks, Platts data showed.
At the close of Asian trade Monday, the August cash Brent/Dubai spread was valued at $3/barrel, slightly above the last low of $2.98/b on December 21, 2010.
Expectations of more sweet crudes to be released from strategic petroleum reserves to make up for the loss of Libyan crudes had pressured the North Sea marker Brent, causing front-month ICE Brent futures to tumble by about $7/b in the last two trading sessions. Brent also slipped into a contango following the news.
This in turn hit the Brent/Dubai EFS, effectively shutting the arbitrage window to send Middle East crudes westwards.
With the arbitrage shut, and Asian refiners sidelined due to the outright price fall, length on Middle East crudes build up while demand slips, sending the Middle East crude marker Dubai into a steeper contango.
The July/August Dubai swaps slipped from a 10 cents/b backwardation June 23, to a 24 cents/b contango Monday.
Naphtha has sunk deeper into the doldrums, undermining demand for naphtha-rich light sour crudes such as ADNOC's Murban, Lower Zakum and Umm Shaif.
August naphtha crack against Dubai was valued at minus $7.15/b Monday, from minus $4.56/b last Friday.
