The DME Oman January futures contract was pegged at the same level as January ICE Brent crude oil futures at the close of trading in Asia on Thursday, as end-month volatility and record product margins narrowed the spread between sweet and sour crude benchmarks.
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At the same time, the January ICE Brent futures contract was seen bid at $63.02/b and offered at $63.04/b on the Intercontinental Exchange’s trading screen.
Market sources in Asia attributed the spike in the price of the sour crude grade to low liquidity on the DME coupled with end-month covering activity.
Traders said they typically see price volatility on the DME resulting from position covering every month.
Talk in the market also pointed to record-high fuel oil product margins that have kept prices for sour (high sulfur) crude grades — typically valued at discounts to lower sulfur alternatives — relatively well supported amid the recent downturn in global crude oil prices.
Oman and Dubai are higher sulfur, sourer crude grades compared to Brent, which is typically considered a premium crude grade due to its lower sulfur content and higher yield of more attractive refined products.
But margins for heavier, bottom-of-the-barrel products such as fuel oil have surpassed lighter yields such as naphtha and gasoline of late, as global product inventories tighten, said market sources.
The front-month December Singapore 180 CST HSFO swap crack against Dubai swaps hit an all-time of $4.61/b this week on November 20, S&P Global Platts data shows. The December 380 CST swap crack against Dubai swaps also hit an all-time of $3.94/b on the same day.
Meanwhile, ICE January Brent crude futures settled at a nine-month low of $62.53/b Tuesday this week, erasing a climb of around $20/b in just a month as investors remained concerned over weak demand and oversupply.
Platts Oman was assessed at $62.79/b, 24 cents/b under Brent and a 96 cents/b premium to January cash Dubai crude, which was assessed at $62.45/b as of 4:30 pm Singapore time on Thursday.
DME Oman briefly sat at a premium to ICE Brent crude futures recently.
The 4:30 pm market price for Oman crude settled higher than the Brent benchmark for four days in a row from September 25 to 28, reaching as high as $6.79/b over the global crude oil benchmark at one point.
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