Prompt Brent Dated-to-Frontline hits three-year high on strong Dated Brent

London (Platts)--13 Sep 2017 748 am EDT/1148 GMT

The front-month Brent Dated-to-Frontline (DFL) contract hit a three-year high Tuesday at minus 20 cents/b, and continued to climb in European morning trade Wednesday, with a bid posted at minus 15 cents/b at 1115 GMT.

The prompt DFL contract was last higher in July 2014, when it rose above the minus 10 cents/b threshold, according to S&P Global Platts records.

The DFL measures the premium of physical North Sea crude to the calendarized ICE Brent futures and represents the strength of the physical Dated Brent complex against paper.

Trading sources linked the rise in the DFL to a strong Dated Brent complex but said it was not immediately attributable to a tightening of fundamentals.

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"To my mind, it is overdone based on the rest of the market," a trader said. "US crude will compete as soon as they can export again. Fundamentals have been tighter for sure, but I'm not sure they justify these lofty numbers."

The physical Dated Brent complex saw differentials jump over the past few days, driven by strong buying interest in the Platts Market on Close assessment process.

Tuesday's MOC saw outstanding bids from Glencore, Petroineos and Stasco across the four BFOE grades propel differentials to new multi-month highs.

While the ongoing bidding activity signals strong fundamentals, several trading sources pointed to a number of factors suggesting a more balanced picture.

These included weaker demand from Asian refiners for North Sea crude, as well as expectations of increasing volumes of US crude hitting the European and Asian markets in coming weeks.

"With this Dubai [Exchange of Futures for Swaps], and the WTI-Brent spread, people are looking at US cargoes instead of North Sea," a trader said. "Once the hurricane is going to its real end, more US crude will head East. Dated [Brent] is too expensive."

The front-month WTI-Brent spread was assessed at minus $5.51/b at the London 1630 close Tuesday, compared with a year-to-date average of minus $2.64/b.

--Maude Desmarescaux,
--John Morley,
--Edited by Jeremy Lovell,

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