Premium quality crude oil barrels are currently at some of their cheapest ever levels in the global market, with supply imbalances causing quality spreads to narrow significantly and for sustained lengths of time. Derivatives of light, sweet Brent crude have fallen to record lows versus Dubai derivatives traded on the Intercontinental Exchange in recent weeks. All things being equal, a sour crude grade (with higher sulfur content), or one with a yield of more bottom-of-the barrel products such as fuel oil, would be worth less than a sweeter (lower sulfur), lighter crude that yields more premium product. However, a sharp downturn in global supplies of heavier, sourer crude barrels over the last few months has resulted in demand for these grades climbing, along with prices. The spread between March Brent and Dubai swaps, for instance, has been consistently assessed below $1/b since 18 January this year, according to Platts assessments as of 0830 GMT at the Asian close of trading. The swap spread also flipped into negative territory for one day during this period, coming in at minus 21 cents/b as of 14 February, but corrected back the next day. The same spread between front month Brent and Dubai swaps… continue reading
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Source: CTRM Center