Dubai oil, a Arabian Gulf benchmark for Asia, will sell in July at its deepest discount in a year as buyers favour lighter, sweeter crudes over the more sulfur-heavy blends sold mainly in the Middle East.
The official selling price for Dubai crude loading in July will be 40 cents less than the Oman futures contract for that month, according to an e-mailed statement Thursday from Dubai’s Department of Petroleum Affairs. The discount grew from 25 cents below Oman for June and takes Dubai crude to its lowest level against the benchmark since June 2010.
The Oman futures contract is the only product traded on the Dubai Mercantile Exchange, which announced the price differential determined by the department. The spread between Oman oil futures and costlier European benchmark Brent crude has more than tripled over the past six months to $6.74 a barrel on Wednesday April 27.
Crude oil is gaining this year as unrest in the Middle East and the halt in exports from Libya due to conflict in that country have raised concern that supply may be interrupted elsewhere. The lack of Libyan crude has pushed up the premium buyers are willing to pay for grades such as Brent. Libya's oil is lighter and sweeter than many Middle East crudes, meaning that it flows more easily and contains less sulfur and is therefore easier to refine.
Brent is selling for a third more than it did at the end of last year, rising to $125.13 a barrel on Wednesday. Oman crude has risen by 33 percent to $118.39 a barrel in the same period.
The final July price for Dubai oil will be calculated on the last day of trading for that month’s contract on the DME, when Oman is set. The Department of Petroleum Affairs issues the price formula for its crude on the last Thursday of every month to apply to the closing three months ahead.
The DME’s futures contract also determines the price for Oman’s production of more than 800,000 barrels a day. Oman and Dubai are the only government entities to price their oil based on the exchange-generated price.For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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