Dubai EFS jumps to highest since Opec cut
Singapore, March 18, 2010
Exchange of Futures for Swaps (EFS) for May jumped to $2.50 a barrel on Thursday, the highest level since December 2008 when Opec producers began record supply curbs, traders said.
This raised the issue of whether Asian refiners would reduce pricier imports from the West, after having taken record volumes of West African crude in the first quarter. The EFS slid to discounts by end-January and early-February before shooting back up.
A wider Brent/Dubai EFS spread raises the relative cost for Asian refiners to buy West African, Mediterranean and Urals grades.
Traders attributed the jump to a strong Brent and a weak Dubai after Opec members offered nearly full allocations over the past few months.
On Wednesday, Brent crude oil futures rallied by more than $1.00 to $81.65 a barrel, the highest since January, after Opec decided to leave output targets unchanged. But Brent fell more than $1.00 to an intraday low of $80.90 a barrel on Thursday and last traded at $81.27, on a stronger dollar.
"Brent spreads are very strong. However, I think there are lots of people who short EFS, with not many obvious sellers," a Western trader said.
But another trader said the EFS will rise a little bit more at best. "A lot of the move has already been done. Maybe 20-30 cents more is my guess," he said.
Opec has left its output ceiling unchanged for more than a year since announcing a record supply curb of 4.2 million barrels per day (bpd) agreed to in December 2008.
On Wednesday, Opec ministers agreed not to change oil output targets they are already exceeding, anticipating that demand will pick up later in the year to mop up extra barrels the producers may pump.
But Nigeria said it would like its Opec output quota adjusted because its current target was agreed when production was hampered by militant attacks on oil facilities. – Reuters