Tuesday, May 24, 2022
Home Business Oil forward curves signal tight market, supporting price rally By Reuters

Oil forward curves signal tight market, supporting price rally By Reuters


© Reuters. FILE PHOTO: A GOI company truck is seen next to fuel pumps at a Cepsa petrol station in Cuevas del Becerro, Spain, November 29, 2021. REUTERS/Jon Nazca/

By Bozorgmehr Sharafedin

LONDON (Reuters) – The risk of geopolitical disruption to oil supply at a time of already tight inventories due to the strong post-pandemic recovery has sent the premium commanded by barrels for prompt delivery soaring, suggesting the current price rally has further to run.

Under this “backwardated” market structure, the current price is higher than that of later-dated contract months, encouraging traders to release oil from storage and sell it promptly.

The six-month spread between Brent for March delivery versus September delivery was $6.75 on Friday, the steepest since 2013.

At that time, oil prices were above $100 a barrel, a level analysts predict could be seen again this year as demand outstrips supply.

Brent prices were already above $91 per barrel on Monday and heading for their biggest monthly gain in almost a year. [O/R]

“A confluence of resilient demand, depleting inventories, thinning spare capacity, long investor positioning and lingering geopolitical tensions is propelling north of $90 per barrel,” said Ehsan Khoman, head of emerging markets research at MUFG Bank.

The spread between for March delivery versus September delivery was $6.88 on Monday, compared to around $3 at the start of the year.

“The oil market seems caught in a period of nervousness with tight storage and supply disruptions fuelling fears and boosting the market mood,” analysts at Julius Baer said.

Russia and the West have been at loggerheads over Ukraine, fanning fears that energy supplies to Europe could be disrupted.

The market is also on alert over the Middle East after the United Arab Emirates said it had intercepted a ballistic missile fired by Yemen’s Houthi as the Gulf state hosted Israel’s President Isaac Herzog in a first such visit.

“These frothy dynamics could last over the coming weeks and oil prices remain at risk of further spikes, with a possibility of moving towards $100 per barrel just for the sake of it,” the Julius Baer analysts said.

UBS analysts also said the market would be sensitive to potential supply disruptions given low commercial oil inventories in the face of potentially record levels of demand in 2022.

European diesel’s six-month spread similarly hit its widest backwardation since March 2008 on Friday, reaching $66.25 a tonne on tight supplies, Refinitiv Eikon data showed.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.



Source link

RELATED ARTICLES

7 Reasons Your Websites Need A Mot Check

Websites are constantly evolving and changing, which can make it difficult for them to stand out from the competition. However, if you want your...

Does Scrum Master Certification Eligibility Criteria 2022 fit IT, managers?

Having a very clear idea about the basic eligibility of the scrum master certification is very much advisable for people so that everybody can...

Netflix goes to ‘Tollywood’ and beyond for long-sought India growth By Reuters

2/2© Reuters. A billboard for the Netflix film "Thar" is seen on a street in Mumbai, India, May 19, 2022. REUTERS/Francis Mascarenhas2/2By Shilpa...
- Advertisment -

Most Popular

7 Reasons Your Websites Need A Mot Check

Websites are constantly evolving and changing, which can make it difficult for them to stand out from the competition. However, if you want your...

Does Scrum Master Certification Eligibility Criteria 2022 fit IT, managers?

Having a very clear idea about the basic eligibility of the scrum master certification is very much advisable for people so that everybody can...

Netflix goes to ‘Tollywood’ and beyond for long-sought India growth By Reuters

2/2© Reuters. A billboard for the Netflix film "Thar" is seen on a street in Mumbai, India, May 19, 2022. REUTERS/Francis Mascarenhas2/2By Shilpa...

Hovsco Offers the Best Electric Trike Bike—Buy One Of Them

There are several electric trike bikes available for purchase, but what makes Hovsco offer the best electric trike bike? This review looks at the...