• 4 minutes Permian in for Prosperous and Bright Future
  • 7 minutes Amount of Oil Usage in the United States
  • 10 minutes America Could Go Fully Electric Right Now
  • 5 hours Kalifornistan, CO2, clueless politicians, climate hustle
  • 1 hour Something wicked this way comes
  • 9 hours JP Morgan Christyan Malek, report this Summer .. . We are at beginning of oil Super Cycle and will see $190 bbl Brent by 2025. LOL
  • 10 hours Tesla Battery Day (announcements on technology)
  • 16 hours US after 4 more years of Trump?
  • 1 day Famine, Economic Collapse of China on the Horizon?
  • 1 day .
  • 11 hours Ten Years of Plunging Solar Prices
  • 12 hours Why NG falling n crude up?
  • 2 days Natural Gas Saves Southern California From Blackouts
Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

More Info

Premium Content

Oil Market Is Set To Become Very Tight Later This Year

Brent Crude futures prices for later this year suggest that the oil market is undersupplied, despite recent rises in U.S. crude oil inventories that sent spot oil prices plunging in the past two days, Reuters market analyst John Kemp argues.

Although U.S. commercial crude oil inventories have been rising in recent weeks, they have been doing so less than normal for this time of the year although U.S. refineries have been undergoing heavy spring maintenance to be ready to process fuel in the fall and winter of 2019, just ahead of the new low-sulfur requirements for shipping fuels, Kemp writes.

Oil prices plunged on Thursday to the lowest in a month after U.S. government data showed on Wednesday that inventories hit their highest since September 2017 and production soared to another record level last week.

Analysts and the market interpreted the increase in inventories and the record-high U.S. crude oil production as suggesting that the market may be well-supplied.

However, the Brent Crude futures prices are now in a steep backwardation—the market situation in which front-month prices are trading at a premium compared to prices further out in the future—a sign of a tighter and undersupplied market.

Futures prices between July and December are trading at a backwardation of more than $2.70 per barrel—a sign that traders expect the market to be very tight in the second half of 2019, according to Kemp. Related: Saudi Arabia, UAE “Draw The Death And Collapse Of OPEC”

When the U.S. refinery maintenance ends and refineries begin full production ahead of the summer driving season, crude oil inventories are likely to decline quickly, leading to a tighter market, Kemp says. That is, unless oil demand deteriorates going forward or Saudi Arabia ramps up production significantly.

The July/August Brent time spread continues to strengthen, while the flat price weakened on Thursday, Warren Patterson, Head of Commodities Strategy at ING, said on Friday.

“The Jul/Aug spread continues to move into deeper backwardation, with the spread trading as high as US$0.78/bbl this morning, up from US$0.61/bbl on Tuesday. This spread strength does suggest that the spot physical market continues to tighten,” Patterson noted.

By Tsvetana Paraskova for Oilprice.com

More Top Reads From Oilprice.com:


Download The Free Oilprice App Today

Back to homepage





Leave a comment
  • hari donz on May 03 2019 said:
    what does it mean when they say" When the U.S. refinery maintenance ends and refineries begin full production ahead of the summer driving season, crude oil inventories are likely to decline quickly, leading to a tighter market, Kemp says" , crude oil inventories are likely to decline quickly but how & why??

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News