Collapse of crude spreads catches traders

Many traders and hedge funds are nursing losses after a whiplash reversal in one of the biggest commodity trading trends of the year – a bet on a widening spread between different types of crude oil, the FT reports. Traders say the unexpected release of the Western countries’ petroleum strategic stocks last week left many in the oil market wrong-footed, particularly those that had traded on the relative price differential of Brent crude and Dubai crude. The price difference has narrowed sharply between the lower quality, heavy sour Dubai crude, the benchmark for Middle East supplies, and the premium quality, light sweet Brent, the North Sea’s benchmark. The spread has plunged to a six-month low, dropping nearly 50 per cent in just four days, traders said.