Oil market indicators indicate sufficient supply and weak demand

  • Several oil market gauges are reducing supply concerns in the oil markets, adding downward pressure on prices as traders focus on weak demand.
  • The WTI futures curve has already shifted to forward contracts while first-month Brent crude futures prices fell to second-month prices in the delay period this week.
  • Meanwhile, the premium for Oman futures over Dubai swaps has fallen to less than $1, indicating much weaker demand.

Global oil futures and swaps are increasingly showing signs of easing supply concerns and concerns about further weakness in crude oil demand have re-emerged.

instant spreads per US standard, West Texas Intermediate Crudeis already being prepared, which indicates that there is enough supply in the near term. Brent crude Futures prices from the first month to the second month also fell in the control period earlier this week.

Contango is a market condition in which prices for delivery at later dates are higher than spot prices – a market condition that indicates oversupply and one that traders use to store oil for delivery at a later date. The opposite market situation – defaulting – usually occurs in times of market deficit, in which the prices of the front month contracts are higher than those that were present at the right time.

Another closely followed oil market barometer for signs of demand in the main oil-importing region, Asia, is the premium of Oman futures over Dubai swaps. This is premium Projection Thursday to less than $1 a barrel – compared to a premium of more than $15 a barrel in March this year – indicating much lower demand. The insurance premium fell about 80% in November alone, according to Bloomberg estimates.

So far this month, oil prices have slumped amid growing fears of an economic slowdown and rising Covid infections in China, as some form of movement restrictions has returned in nearly 50 large cities.

China scores Almost record numbers of new Covid infections per day – near the April 2022 peak when the Shanghai financial center was closed for weeks – this is likely to drive down fuel demand as currently 48 Chinese cities have some form of movement restrictions.

According to analysts at Nomura, as of Monday, regions accounting for nearly 20% of China’s GDP were reeling from the recent Covid restrictions. Rising Covid cases in China and the return of restrictions affected oil prices this month as the market fears another slowdown in Chinese economic growth and fuel demand, on top of fears of a global recession.

By Irina Slav for Oilprice.com

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