The contango structure in the Dubai crude swaps market narrowed Monday as the tighter program for Qatar's Al-Shaheen crude and Iraq's Basrah crude weighed on sentiment, traders said Monday.
The spread between December and January Dubai crude swaps was assessed at a two-week high of minus 49 cents/b Monday. It was last assessed at minus 54 cents/b Friday, up from a nine-month low of minus 66 cents/b on November 8, S&P Global Platts data shows.
Similarly, the spreads between January and February Dubai crude swaps, and February and March Dubai crude swaps were also assessed higher at minus 53 cents/b and minus 56 cents/b respectively on Monday, up from multi-week lows of minus 65 cents/b for both on November 9.
The spreads strengthened amid talk that there is lower availability of Middle East crudes on offer this month while demand for crude from regional refiners is expected to be steady as product cracks remain at healthy levels.
Scheduled field maintenance is set to cut the amount of Al-Shaheen crude exports to 10 cargoes of either 500,000 or 600,000 barrels for January loading, from 14 cargoes the month before, traders said on Friday.
Meanwhile, Iraq will export an average of 3.163 million b/d of Basrah crude oil in December, down 2.4% from November's program, with Basrah light seeing an increase and Basrah Heavy seeing a dip in volumes, according to the provisional loading schedule seen by Platts on Monday.
"I think the medium grades [supplies] generally are tighter, compared to [at the] start of the month," said a Singapore-based crude trader.
Others noted that the market remained strong fundamentally amid steady demand from regional refiners on the back of the continued strength in product cracks.
Second-month gasoil and jet fuel/kerosene to Dubai crude swap cracks have averaged $12.33/b and $13.19/b respectively for November to date, compared to $12.37/b and $13.02/b last month.
Both the gasoil and jet fuel cracks average in October were the highest since November last year, according to Platts data.
The second-month naphtha to Dubai crude crack swap has averaged $1.25/b in November so far, up from minus $1.09/b last month. The naphtha crack is the highest since April this year when it averaged $2.29/b.
The second month 180 CST high sulfur fuel oil crack versus Dubai swaps also averaged higher at minus $2.60/b in November to date, compared with minus $4.23/b in October, the data showed.
"The physical market is stronger... [so the] deep contango [in the derivatives market] should be capped," said a North Asian crude trader.
