SINGAPORE: The new front-month December/January Dubai intermonth spread flipped into backwardation this week, the first time in 16 months, as demand for Middle East crude extended its strength into the third month, traders said on Thursday.
The intermonth spread was at a premium of 5 cents a barrel on Thursday, largely steady from a 6-cent premium on Tuesday.
Last week, the front-month November/December Dubai spread hit parity level twice.
The market for all Gulf grades have been supported in recent months by strong crack spreads for naphtha and middle distillates, coupled with expected peak winter demand for heating oil.
January-loading Middle East cargoes have been traded at much stronger differentials than December-loading lots on robust demand, even as Gulf oil producers raised their official selling prices (OSPs) to Asia to multi-month highs.
Normally, high OSPs tend to depress crude price differentials.
January Oman value jumped to a premium of between 30 and 40 cents a barrel this week from a discount of around 15 cents last week.