Middle East oil markets are signaling near-term supply is outpacing demand for the first time since July, when global prices plummeted after a temporary ceasefire between the US and Iran allowed tankers to exit the Persian Gulf through the Strait of Hormuz.
The nearest timespread for the regional Dubai benchmark, which helps set pricing for nearly all crude exported from the region, was in a bearish contango structure at the start of the week. The November contract was last at a discount of about $2 a barrel to December, according to traders and brokers who asked not to be named.
Arab oil producing nations are shipping crude at about the same rate as before the war started in February, while Iranian exports remain effectively halted, according to Bloomberg data. Combined exports from Saudi Arabia, the United Arab Emirates, Iraq and Kuwait climbed by 10% to just over 15 million barrels a day last month. June Goh, senior oil market analyst at Sparta Commodities SA, said the current situation is not comparable to the mini-glut of late June, when large volumes of oil sat on very large crude carriers and then exited. "This time, the increase is more gradual."
Transactions on a key S&P Global Energy trading window also occurred at weaker levels, another sign of potential oversupply. Brent crude and US marker West Texas Intermediate both fell by around 7% on Monday after hitting a six-month high in October, helped by increased supply and possible renewed US-Iran peace talks. Warren Patterson, head of commodities strategy at ING Groep NV, noted that while similar hopes have produced nothing before, positive signals are coming from both the US and Iran.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing