DUBAI FUTURES: Contango narrows further after ADNOC cuts November volumes

Singapore —
The contango for benchmark Dubai crude futures narrowed further in mid-morning Asia Sept. 17, following news of ADNOC cutting November term volumes by 25%.

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At 0300 GMT (11 am Singapore time), the October/November timespread was pegged at a contango of 29 cents/b, up 2 cents/b from the Asian close on Sept. 16, S&P Global Platts data showed. The November/December timespread was pegged at a contango of 31 cents/b, up 5 cents/b over the same period.

ADNOC informed term lifters on Sept. 16 that it would cut volumes available for export in November by 25% for all four grades.

The news was largely bullish, but a further uptick in the market is capped as the OPEC+ alliance was expected to keep its current output cuts.

Key OPEC+ ministers will convene online Sept. 17 in the face of stalling global oil demand, patchy compliance with output cuts, and Libya’s potential return to the market after a month-long blockade, Platts had reported.

Despite frustration among members that oil prices have failed to rise as much as hoped, delegates say the OPEC+ alliance is unlikely to reintroduce deeper cuts to buttress the oil market’s comeback from the coronavirus pandemic.

Talks among the nine-country Joint Ministerial Monitoring Committee, co-chaired by the alliance’s biggest members Saudi Arabia and Russia, are instead likely to focus on shoring up discipline, they added.

The prompt-month Brent/Dubai Exchange of Futures for Swaps spread also narrowed in mid-morning trade Sept. 17, with ICE Brent futures sliding heavily from its overnight settlement.

“As far as the post JMMC impact, beyond reaffirming compliance and perhaps some resolution on catching up quota volumes, we should expect limited new news and certainly nothing to significantly bump the crude market out of its current funk and push Brent back to $45/b,” AxiCorp chief global markets strategist Stephen Innes said in a note Sept. 17.

The November EFS was pegged at minus 14 cents/b at 0300 GMT, narrowing 5 cents/b from the Asian close at Sept. 16, Platts data showed.