Middle East Crude-ESPO may weaken as Brent/Dubai slumps

SINGAPORE: Brent's premium to Dubai shrank to the narrowest level in six months, firmly entrenching a slumping trend for the Middle East crude market and raising expectations for lower values for competing Russian ESPO Blend.

Russia's top producers issued tenders for August and September-loading ESPO, adding pressure to unsold July loading cargoes and to Dubai-linked grades, including Oman.

No Oman trades were heard yet after cargoes last moved at a premium of about 60 cents a barrel to Dubai last week, but traders said the next deals would probably take place at lower levels, especially if led by a drop in ESPO.

* EAST WEST

- The Brent/Dubai Exchange of Futures for Swaps (EFS) for August fell $1 $3.30 a barrel at 0830 GMT, Reuters data showed. The front-month EFS on June 15 touched $9.20, the highest intraday value since the spread reached a record of almost $12 in October 2004.

The shrinking spread makes it easier for Brent-priced West African crude to move to Asia and makes it harder for Middle East producers to ship their Dubai-related grades to Europe.

"Dubai-linked crude will be pressured," a Singapore-based trader said. "Maybe ESPO will be a bit weaker going forward because of the crash in flat prices and arbitrage cargoes may become cheaper."

* TENDERS

- Surgutneftegaz , Russia's fourth-largest oil producer, issued a tender to sell four cargoes of ESPO crude for loading in August to September. Surgut's 100,000-tonne cargoes will be loaded at the Russian Far East terminal of Kozmino on Aug. 8-11, 17-20, 22-25, Aug 29- Sept. 1. The tender closes on Monday.

- Russia's top oil producer Rosneft offered via tender two 100,000-tonne cargoes of ESPO Blend crude for loading in August and September. The cargoes are for loading Aug. 10-13 and Aug. 31-Sept. 3 and the tender closes on Tuesday.

* DME OMAN

- August Oman traded on the Dubai Mercantile Exchange (DME) tumbled 33 cents to a premium of 47 cents a barrel to Dubai swap quotes at 0830 GMT, using the settlement price for DME futures, the ICE one-minute marker for Singapore and the Brent-Dubai EFS as calculated by Reuters.

* MARKET NEWS

- The industrialized world has likely capped oil prices for the rest of the year by releasing emergency reserves, a Reuters poll found, suggesting they have bought the world economy more time to mend.

- While most analysts have not formally revised their annual forecasts, a Reuters poll of 30 analysts and traders showed all but one believe Brent crude oil will remain below $120 a barrel through the end of the year after consumer nations released emergency reserves for the third time ever.

- Norway's Statoil is setting up a desk in Singapore to trade liquefied natural gas (LNG) in Asia as more companies look to profit from rising demand for the fuel in China and India, traders said on Monday.

* CRACK SPREADS

- Fuel oil's July crack gained 58 cents to a discount of $4.50 a barrel to Dubai crude, its highest level since Aug. 30, 2010, while the August crack narrowed 37 cents to a discount of $5.51 a barrel on lower crude benchmarks.

- Gas oil's July crack climbed 24 cents to a premium of $17.13 a barrel to Dubai crude, while the August crack was 11 cents higher at $17.07.

- Naphtha CFR Japan's August discount to Brent crude widened 10 cents to $6.41, while September's crack was 30 cents wider at a discount of $6.23 a barrel.

* OUTRIGHT PRICES

- August ICE Brent was at $104.01 a barrel at 0830 GMT, down $2.77 from Friday.

Copyright Reuters, 2011