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Brent/Dubai EFS tightens as OPEC capacity concerns linger

https://www.chemnet.com   Oct 09,2019 S&P Global Platts
Benchmark Dubai crude futures' discount to ICE Brent continued to narrow midweek Wednesday in Asia, as limitations to OPEC's spare capacity came under the spotlight with the release of the US Energy Information Administration's monthly report.

At 10 am in Singapore (0200 GMT), the December Brent/Dubai Exchange Futures for Swaps spread, or EFS, had narrowed to $2.80/b, after being assessed at $2.91/b at the 4:30 pm Singapore time (0830 GMT) close in Asia on Tuesday.
The September 14 attacks on Saudi Arabia's Abqaiq facility had dug up new concerns about the fragility of global spare production capacity, the US Energy Information Administration said late Tuesday.

"The long-term effects from the disruption remain highly uncertain," EIA said in its monthly Short-Term Energy Outlook. "The attack revealed vulnerabilities to a significant amount of crude oil production in a country that holds most of the spare production capacity within [OPEC]."

The attack, which disrupted an estimated 5% of global liquid fuels supply, caused OPEC spare crude capacity to fall to 1.23 million b/d in September from about 2.23 million b/d in August, EIA said. EIA forecasts OPEC spare capacity to return above 2 million b/d by January.

Dubai intermonth spreads were weaker in midmorning trading in Asia, with November/December futures spread being pegged at $1.05/b, down from Platts assessed level of $1.10/b on Tuesday.

The December/January spread also softened a notch from Platts Tuesday's assessment of 89 cents/b, falling to the market's notional peg of 84 cents/b at 10 am in Singapore on Wednesday.

Saudi oil production fell to 8.5 million b/d last month from 9.85 million b/d in August due to the attack. EIA estimates Saudi crude oil output returned to pre-outage levels as of October 3.

The attack, along with falling production in Venezuela and Iran, meant OPEC oil output averaged 28.23 million b/d in September, down 1.55 million b/d from August and the lowest level for OPEC production since November 2003, EIA said.

The latest S&P Global Platts survey estimates OPEC production averaged 28.45 million b/d in September, down 1.48 million b/d from August.
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