Latest news with #backwardation
Yahoo
5 days ago
- Business
- Yahoo
Oil price structure narrows, premiums fall as supplies rise, summer demand ends
By Florence Tan, Georgina McCartney and Robert Harvey SINGAPORE/HOUSTON/LONDON (Reuters) -Premiums for prompt benchmark oil prices globally are falling compared with those in future months on rising output from the Middle East, Latin America and Europe, just as peak summer demand ends, traders and analysts said on Thursday. Easing concerns that the U.S. could impose more sanctions on Russia and further disrupt oil supplies are also weighing on oil prices, they said. The six-month time spreads for Brent futures, U.S. West Texas Intermediate futures and Middle East marker Dubai have narrowed by more than $1 a barrel in backwardation since the start of the month. Backwardation refers to a market structure where prompt prices are higher than those in future months, indicating tight supply. A narrowing of the structure indicates a market view that supplies are expected to rise. "Brent and Dubai time spreads are softening mainly on expectations of incremental OPEC+ supply from September and easing fears of Russian disruption after recent steady flows via both Baltic and Black Sea," said Shohruh Zukhritdinov, a Dubai-based oil trader. "U.S. crude supply remains stable, but refinery runs will gradually decline into the shoulder season, easing prompt tightness," he said. U.S. President Donald Trump and Russian President Vladimir Putin will meet in Alaska on Friday to strike a ceasefire deal in Ukraine. Citi analysts said Brent could land in the low-$60s per barrel area, if there is progress towards a U.S.-Russia deal. RISING SUPPLY, END OF SUMMER Traders are bracing for more supplies after the Organization of the Petroleum Exporting Countries and their allies, known as OPEC+, agreed to increase September output, just as non-OPEC producers such as Guyana, Brazil and Norway launched new production. Peak oil demand during the Northern Hemisphere summer is also ending, cooling red-hot diesel margins in Europe and reducing the burning of crude for power in Saudi Arabia, the sources said. "We saw a lot of selling in the window, with expectation around crude demand revised down as refinery margins weaken as gasoil/diesel cracks unravel," said Harry Tchilinguirian, group head of research at Onyx Capital Group, referring to physical trade in the North Sea market. "Now that seasonal demand is going to unwind, and we cannot be sure that China will keep up elevated imports (for stockpiling), so where does the extra Saudi barrels go?" Meanwhile, spot premiums for Middle East benchmarks Dubai and Oman hovered at their lowest in more than a month for October-loading supply. [CRU/M] Still, Dubai is relatively stronger than Brent, keeping the price spread between the benchmarks - known as the Exchange of Futures for Swaps - narrow and allowing Atlantic Basin supply to head to Asia. Asian refiners have already snapped up millions of barrels of oil from the United States, Africa and Europe for delivery in September and October. Neil Crosby, analyst at Sparta Commodities, said there is still uncertainty over Russian supply with the world's third-largest oil importer India buying spot cargoes to replace Russian oil in recent weeks. "Some (Russian) Urals will go to China but the story is not over yet and there is still some tail risk over what happens to Russian (oil) that cannot clear which makes the EFS trade short term even trickier than normal," he said. Sign in to access your portfolio
Yahoo
6 days ago
- Business
- Yahoo
Oil price structure narrows, premiums fall as supplies rise, summer demand ends
By Florence Tan, Georgina McCartney and Robert Harvey SINGAPORE/HOUSTON/LONDON (Reuters) -Premiums for prompt benchmark oil prices globally are falling compared with those in future months on rising output from the Middle East, Latin America and Europe, just as peak summer demand ends, traders and analysts said on Thursday. Easing concerns that the U.S. could impose more sanctions on Russia and further disrupt oil supplies are also weighing on oil prices, they said. The six-month time spreads for Brent futures, U.S. West Texas Intermediate futures and Middle East marker Dubai have narrowed by more than $1 a barrel in backwardation since the start of the month. Backwardation refers to a market structure where prompt prices are higher than those in future months, indicating tight supply. A narrowing of the structure indicates a market view that supplies are expected to rise. "Brent and Dubai time spreads are softening mainly on expectations of incremental OPEC+ supply from September and easing fears of Russian disruption after recent steady flows via both Baltic and Black Sea," said Shohruh Zukhritdinov, a Dubai-based oil trader. "U.S. crude supply remains stable, but refinery runs will gradually decline into the shoulder season, easing prompt tightness," he said. U.S. President Donald Trump and Russian President Vladimir Putin will meet in Alaska on Friday to strike a ceasefire deal in Ukraine. Citi analysts said Brent could land in the low-$60s per barrel area, if there is progress towards a U.S.-Russia deal. RISING SUPPLY, END OF SUMMER Traders are bracing for more supplies after the Organization of the Petroleum Exporting Countries and their allies, known as OPEC+, agreed to increase September output, just as non-OPEC producers such as Guyana, Brazil and Norway launched new production. Peak oil demand during the Northern Hemisphere summer is also ending, cooling red-hot diesel margins in Europe and reducing the burning of crude for power in Saudi Arabia, the sources said. "We saw a lot of selling in the window, with expectation around crude demand revised down as refinery margins weaken as gasoil/diesel cracks unravel," said Harry Tchilinguirian, group head of research at Onyx Capital Group, referring to physical trade in the North Sea market. "Now that seasonal demand is going to unwind, and we cannot be sure that China will keep up elevated imports (for stockpiling), so where does the extra Saudi barrels go?" Meanwhile, spot premiums for Middle East benchmarks Dubai and Oman hovered at their lowest in more than a month for October-loading supply. [CRU/M] Still, Dubai is relatively stronger than Brent, keeping the price spread between the benchmarks - known as the Exchange of Futures for Swaps - narrow and allowing Atlantic Basin supply to head to Asia. Asian refiners have already snapped up millions of barrels of oil from the United States, Africa and Europe for delivery in September and October. Neil Crosby, analyst at Sparta Commodities, said there is still uncertainty over Russian supply with the world's third-largest oil importer India buying spot cargoes to replace Russian oil in recent weeks. "Some (Russian) Urals will go to China but the story is not over yet and there is still some tail risk over what happens to Russian (oil) that cannot clear which makes the EFS trade short term even trickier than normal," he said.
Reuters
6 days ago
- Business
- Reuters
Oil price structure narrows, premiums fall as supplies rise, summer demand ends
SINGAPORE/HOUSTON/LONDON, Aug 14 (Reuters) - Premiums for prompt benchmark oil prices globally are falling compared with those in future months on rising output from the Middle East, Latin America and Europe, just as peak summer demand ends, traders and analysts said on Thursday. Easing concerns that the U.S. could impose more sanctions on Russia and further disrupt oil supplies are also weighing on oil prices, they said. The six-month time spreads for Brent futures , U.S. West Texas Intermediate futures and Middle East marker Dubai have narrowed by more than $1 a barrel in backwardation since the start of the month. Backwardation refers to a market structure where prompt prices are higher than those in future months, indicating tight supply. A narrowing of the structure indicates a market view that supplies are expected to rise. "Brent and Dubai time spreads are softening mainly on expectations of incremental OPEC+ supply from September and easing fears of Russian disruption after recent steady flows via both Baltic and Black Sea," said Shohruh Zukhritdinov, a Dubai-based oil trader. "U.S. crude supply remains stable, but refinery runs will gradually decline into the shoulder season, easing prompt tightness," he said. U.S. President Donald Trump and Russian President Vladimir Putin will meet in Alaska on Friday to strike a ceasefire deal in Ukraine. Citi analysts said Brent could land in the low-$60s per barrel area, if there is progress towards a U.S.-Russia deal. Traders are bracing for more supplies after the Organization of the Petroleum Exporting Countries and their allies, known as OPEC+, agreed to increase September output, just as non-OPEC producers such as Guyana, Brazil and Norway launched new production. Peak oil demand during the Northern Hemisphere summer is also ending, cooling red-hot diesel margins in Europe and reducing the burning of crude for power in Saudi Arabia, the sources said. "We saw a lot of selling in the window, with expectation around crude demand revised down as refinery margins weaken as gasoil/diesel cracks unravel," said Harry Tchilinguirian, group head of research at Onyx Capital Group, referring to physical trade in the North Sea market. "Now that seasonal demand is going to unwind, and we cannot be sure that China will keep up elevated imports (for stockpiling), so where does the extra Saudi barrels go?" Meanwhile, spot premiums for Middle East benchmarks Dubai and Oman hovered at their lowest in more than a month for October-loading supply. Still, Dubai is relatively stronger than Brent, keeping the price spread between the benchmarks - known as the Exchange of Futures for Swaps - narrow and allowing Atlantic Basin supply to head to Asia. Asian refiners have already snapped up millions of barrels of oil from the United States, Africa and Europe for delivery in September and October. Neil Crosby, analyst at Sparta Commodities, said there is still uncertainty over Russian supply with the world's third-largest oil importer India buying spot cargoes to replace Russian oil in recent weeks. "Some (Russian) Urals will go to China but the story is not over yet and there is still some tail risk over what happens to Russian (oil) that cannot clear which makes the EFS trade short term even trickier than normal," he said.
Yahoo
6 days ago
- Business
- Yahoo
Oil price structure narrows, premiums fall as supplies rise, summer demand ends
By Florence Tan, Georgina McCartney and Robert Harvey SINGAPORE/HOUSTON/LONDON (Reuters) -Premiums for prompt benchmark oil prices globally are falling compared with those in future months on rising output from the Middle East, Latin America and Europe, just as peak summer demand ends, traders and analysts said on Thursday. Easing concerns that the U.S. could impose more sanctions on Russia and further disrupt oil supplies are also weighing on oil prices, they said. The six-month time spreads for Brent futures, U.S. West Texas Intermediate futures and Middle East marker Dubai have narrowed by more than $1 a barrel in backwardation since the start of the month. Backwardation refers to a market structure where prompt prices are higher than those in future months, indicating tight supply. A narrowing of the structure indicates a market view that supplies are expected to rise. "Brent and Dubai time spreads are softening mainly on expectations of incremental OPEC+ supply from September and easing fears of Russian disruption after recent steady flows via both Baltic and Black Sea," said Shohruh Zukhritdinov, a Dubai-based oil trader. "U.S. crude supply remains stable, but refinery runs will gradually decline into the shoulder season, easing prompt tightness," he said. U.S. President Donald Trump and Russian President Vladimir Putin will meet in Alaska on Friday to strike a ceasefire deal in Ukraine. Citi analysts said Brent could land in the low-$60s per barrel area, if there is progress towards a U.S.-Russia deal. RISING SUPPLY, END OF SUMMER Traders are bracing for more supplies after the Organization of the Petroleum Exporting Countries and their allies, known as OPEC+, agreed to increase September output, just as non-OPEC producers such as Guyana, Brazil and Norway launched new production. Peak oil demand during the Northern Hemisphere summer is also ending, cooling red-hot diesel margins in Europe and reducing the burning of crude for power in Saudi Arabia, the sources said. "We saw a lot of selling in the window, with expectation around crude demand revised down as refinery margins weaken as gasoil/diesel cracks unravel," said Harry Tchilinguirian, group head of research at Onyx Capital Group, referring to physical trade in the North Sea market. "Now that seasonal demand is going to unwind, and we cannot be sure that China will keep up elevated imports (for stockpiling), so where does the extra Saudi barrels go?" Meanwhile, spot premiums for Middle East benchmarks Dubai and Oman hovered at their lowest in more than a month for October-loading supply. [CRU/M] Still, Dubai is relatively stronger than Brent, keeping the price spread between the benchmarks - known as the Exchange of Futures for Swaps - narrow and allowing Atlantic Basin supply to head to Asia. Asian refiners have already snapped up millions of barrels of oil from the United States, Africa and Europe for delivery in September and October. Neil Crosby, analyst at Sparta Commodities, said there is still uncertainty over Russian supply with the world's third-largest oil importer India buying spot cargoes to replace Russian oil in recent weeks. "Some (Russian) Urals will go to China but the story is not over yet and there is still some tail risk over what happens to Russian (oil) that cannot clear which makes the EFS trade short term even trickier than normal," he said.
Yahoo
07-08-2025
- Business
- Yahoo
Analysis-Why the oil market is tight despite big OPEC+ output hikes
By Robert Harvey, Ahmad Ghaddar and Seher Dareen LONDON, August 7 (Reuters) -OPEC+ oil producers have used high summer demand to launch their first output increases in three years, but those targets have proved difficult to hit, leaving the market surprisingly tight. On paper, the world's largest group of oil-producing countries should be pumping an extra 2.5 million barrels of oil a day in September versus March, but the data shows that is not likely to happen. The reason is twofold, with some countries finding it hard to pump more, while others are being instructed by OPEC+ to hold back, as punishment for producing above their quotas in the past. "Iraq and to a lesser extent Russia are compensating for past overproduction and Kazakhstan was already producing at maximum capacity back in March," said Jorge Leon, a former OPEC official who now works as head of geopolitical analysis at Rystad Energy. "So the higher quota does not imply higher production." Piling on production month after month might have been expected to lower oil prices, yet Brent crude futures have risen to around $68 a barrel from a 2025 low of $58 in April. It is also notable that prompt prices are now higher than those for six months out, a market dynamic known as backwardation. The prompt premium is justified because rising refinery processing rates and summer demand from power plants in the Middle East are absorbing the OPEC+ hikes, said Energy Aspects analyst Richard Price. "The market is still tight on the prompt." The first-month Brent oil futures contract early this month was trading at a premium of $2.74 to that for delivery in six months, whereas in early May it was at a small discount and a 2025 low. In addition to higher Middle East demand to power summer air conditioning, China has been adding to its inventories. China's crude oil stocks rose by 82 million barrels or almost 900,000 bpd in the second quarter, according to the International Energy Agency. "Chinese oil demand has been better than many expected at the start of the year," said UBS analyst Giovanni Staunovo. "Chinese stockpiling activity has also played a role in keeping crude prices supported." The OPEC+ increases have also come at a time of low stocks in Organisation for Economic Co-operation and Development (OECD) developed nations, a legacy of earlier OPEC+ cuts, a trend that tends to support prices. "Over the past three years, OECD crude inventories have stayed consistently low, especially in the U.S.," said Homayoun Falakshahi, analyst at Kpler. European oil stocks were almost 9% below their five-year average at 394 million barrels in May, according to OPEC data published in July, while U.S. commercial crude stocks in June were also below their five-year average at 419 million barrels. OPEC+ officials have pointed to those low levels as evidence the market needs its increased barrels. THE OPEC+ EIGHT OPEC+ has introduced various output curbs since the pandemic slammed demand, forcing producers to throttle back on oil no one wanted. The tranche of cuts it started to unwind in April involve just eight members - Saudi Arabia, Russia, Iraq, UAE, Kazakhstan, Kuwait, Oman and Algeria. Between April and June they pledged to increase output by 960,000 bpd - a net 730,000 bpd including required cuts - yet OPEC data shows they achieved an increase of only 540,000 bpd. The production data also shows Saudi Arabia accounted for more than 70% of the net increase. Exports rose by just 460,000 bpd from March levels, according to data from analytics firm Vortexa, while world demand grew by an estimated 1 million bpd, according to the International Energy Agency. Saudi effectively accounted for all of the increase, as it boosted exports by 631,000 bpd over the March-June period while shipments from Russia, Iraq, Kazakhstan, Kuwait and Oman fell, Vortexa data showed. Saudi acknowledged that it exceeded its June quota but explained that much of this went into its storage at home and abroad. Exports from Gulf producers typically dip in the summer months because of their own increased summer demand for air conditioning. "The market is telling you it's tight. OPEC announcements need to result in more exports, when we see exports, the market will start to correct," said one veteran crude trader regarding current oil prices. TARGETS VERSUS ACTUAL The current gap reflects in part limited production capacity outside of Saudi Arabia and the United Arab Emirates. Russia, for example, has struggled with Ukrainian attacks on its energy infrastructure. Yet in their monthly meetings to set output levels OPEC+ member states continue to seek higher quotas, even if immediate delivery is problematic, as they can use that extra allowance in the future should their actual capacity rise or OPEC+ request fresh curbs. On August 3 OPEC+ agreed a further increase for September while curbs on members for past overproduction are scheduled to run until next June, ranging in total size per month from about 200,000 to 500,000 bpd."Similar to the previous months, I expect the effective volume increases to lag the quota increases," said Staunovo at UBS. By September the OPEC+ eight aim to increase output to 32.36 million bpd versus output of 30.80 million bpd achieved in March.
