Marcel Siem of Germany, one of three second-round co-leaders, held the lead throughout most of Saturday's third round, but came back to the field. He posted a 4-under 67 and is alone in second place at minus-11.
England's Oliver Wilson also carded a 4-under 67 and is alone in third place at 9-under-par 204.
Defending champion and highest-ranked player in the field, Sergio Garcia, was brilliant out of the bunkers on Saturday, but it only led to a 3-under 68. He is in fourth place and very much in it at 8-under-par 205.
Dredge flew out of the gate on Saturday with three birdies in a row to start the round. As strong a start that was, Dredge made a nearly equal mistake at the par-4 fourth when his drive sailed out of bounds. The Welshman made double-bogey, but stayed in the tournament with consistent play the rest of the way. Dredge birdied the seventh to get to minus-9.
Meanwhile, Siem moved ahead on the leaderboard thanks to a birdie at the first, then a 5-foot birdie putt at three. The German added a 6-foot birdie putt at the sixth to move to minus-10.
Siem kicked in a short birdie putt at the ninth to grab a two-stroke lead. Dredge got one back with a birdie at 10, then a mistake by Siem tied the two atop the leaderboard.
At the par-3 13th, Siem found a greenside bunker and blasted out to 5 feet. His par save lipped out to knot the two and both birdied the par-5 14th.
The par-5 15th became a swing hole. Siem came up short of the putting surface with his second at the hole, but Dredge knocked it stiff, stopping the ball almost 5 feet from the flag. Siem chipped to 3 feet for his third, but Dredge converted his eagle try. The German rolled in his birdie putt to trail by one.
Siem landed in another greenside sand trap, this time at 16 and his best effort stopped 15 feet from the cup on the fringe. He missed that putt and found himself two behind Dredge.
Siem seemed to have a good chance at birdie at the 17th, but his 7-footer never grazed the hole. Both golfers had long birdie looks at the closing hole and both came narrowly close to making them. Both stayed above ground so now Dredge will take a two-shot margin into Sunday as he looks for his second European Tour win.
For Siem, Sunday also offers an opportunity for a second European Tour victory. He took home the trophy at the 2004 dunhill championship and the 26- year-old is ready.
Andrew McLardy, the third second-round co-leader, only managed an even-par 71 and is tied for fifth place with Soren Kjeldsen (67), Francesco Molinari (70) and Brett Rumford (64) at minus-7.
Joakim Backstrom (69), David Bransdon (68), Johan Edfors (67) and Christian L. Nilsson (69) share ninth place at 6-under-par 207.