SINGAPORE: Front-month Brent/Dubai Exchange of Futures for Swaps (EFS) for September jumped on Wednesday to the highest since December 2008 when OPEC producers began record supply curbs.
The spread between the price markers for Atlantic Basin and Middle Eastern crudes surged more than $1 from Monday to $2.75 a barrel on Wednesday.
Traders attributed the jump to a strong Brent due to the tighter prompt physical oil market in Europe and a weak Dubai, especially after recent port and refinery accidents in Asia that forced diverting tankers and deferring crude delivery.
Reflecting the weak sentiment in the Middle East market, the Dubai August/September intermonth spread widened to a discount of 85 cents on Wednesday, its steepest contango in at least five months, Reuters data show.
A wider Brent/Dubai EFS spread raises the relative cost for Asian refiners to buy West African, Mediterranean and Urals grades.
"Dubai-linked crude seems to be more attractive because of the widening Brent-Dubai EFS," a trader said, adding that Middle Eastern grades like Oman may recover compared with last month.
October Oman traded on the Dubai Mercantile Exchange (DME) was assessed at a $1.50 discount to Dubai swap quotes on Tuesday.
Strong Brent prices will also deter Atlantic Basin crudes from entering Asia.
"For dated Brent-linked grades, there should be some correction," the trader said.
Demand for Malaysian and Indonesian crudes should remain firm on healthy fuel oil and gas oil cracks, he said.
Additional reporting by Jasmin Choo.
