Singapore (Platts)--16Nov2012/637 am EST/1137 GMT

Prompt backwardation between first and second month cash Dubai surged to $1.75/barrel Friday, a rise of 47 cents/b day-on-day, as refiners looked to cover requirements for January loading Middle Eastern sour crudes, trading sources said.

The intermonth backwardation was the strongest since June 29 when it was assessed at the same level.

"Refiners are scrambling about, the market is snowballing," a trader at a trading house said.

In addition to the uptick in front to second month backwardation, the front to third month backwardation also rallied to the highest level since mid-March. It rose to $2.73/b Friday, the highest level since March 15 when a spread of $2.80/b was assessed.

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Traders pointed to an uptick in Chinese demand prior to the Chinese New Year and a rise in demand from Japanese refiners during the winter months as factors supporting the market, despite a low margin environment.

Cash Dubai also allows the delivery of Upper Zakum and Oman cargoes as alternative delivery grades.

If relative strength in the Dubai market persists, refiners may look at alternative grades to Dubai and Oman from the spot market to cover requirements, sources said.

January cash Dubai and Oman were both assessed at $107.25/b Friday.

"If Oman stays this level we will see if we need to buy alternatives," a trader at an Asian refiner said.

--Daniel Colover, daniel_colover@platts.com
--Edited by Jeremy Lovell, jeremy_lovell@platts.com

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