Record oil prices close arb opportunities

SINGAPORE (Reuters) - The Brent/Dubai spread has ballooned to its widest since September 2005 after oil prices broke new records, firmly closing arbitrage opportunities for West African and Russian crude to Asia, traders said on Tuesday.

The April Brent/Dubai Exchange of Futures for Swaps (EFS), which is widely used as a proxy for the spread, was assessed around $6.95 a barrel on Tuesday morning, three brokers said, after oil settled at close to a record $108 on Monday.

This leaves it at the highest since early September 2005 when it fell below $7.00.

The value of the Brent/Dubai EFS determines whether it is economical to bring Atlantic Basin crude oil to Asia, with a wider spread raising the relative cost for Asian refiners to buy West African, Mediterranean and Russian Urals grades.

The closed arbitrage opportunities have turned the Middle East crude market increasingly bullish, with sellers of light sour Abu Dhabi crude hiking their assessments of flagship Murban crude from a 5-10 cent premium to a 15-25 cent premium on Monday.

The front month EFS has been consistently widening since late February when it hit a low of $4.35 a barrel, in line with rising oil prices.

U.S. crude shot to a record of $108.21 on Monday, as fears of a U.S. recession have sunk the greenback and sent speculators rushing into commodities.

April Brent rose to a record $104.25, before settling at $104.15.

The contract was unchanged at $104.16 by 0318 GMT (11:18 p.m. EDT on Monday).

(Reporting by Maryelle Demongeot; Editing by Ben Tan)