Brent crude futures slipped to a discount to Dubai quotes on Wednesday for the first time since November 2020, amid worries about looming interest rate hikes dampening growth and fuel demand in the U.S. and Europe, trade sources said.

Brent’s Exchange Futures for Swaps (EFS) to the Dubai Middle East benchmark futures for August dropped to a discount of 4 to 8 cents a barrel in early Asia trade, the sources said. The price spread was at a premium of 47 cents at Tuesday’s market close.

The narrowing of the price spread between the two benchmarks could boost Asia’s demand for sweet crude produced in the Atlantic Basin and Brazil priced off Brent, although a recent uptick in supertanker freight rates could raise costs for such shipments.

The spread has amid a strong sell-off in Brent due to worries about further U.S. and European Union rate hikes hitting global growth and fuel demand, while the Dubai marker has held relatively strong, the sources said.

At the same time, ICE Brent’s discount for August against September widened on Tuesday.

The Dubai marker has firmed against Brent amid expectations of tighter supply of Middle Eastern crude after Saudi Arabia said it would cut its output by 1 million barrels per day (bpd) in July to 9 million barrels per day (bpd) in its biggest reduction in years.
Source: Reuters (Reporting by Jeslyn Lerh and Florence Tan; Editing by Jacqueline Wong; Editing by Sonali Paul)