Rapid widening of key oil spread signals tightening crude market – Bloomberg

Early Wednesday morning in Europe, Bloomberg quotes oil futures data to hint at the tightening in the market.

“A vital corner of the crude market is flashing increasingly bullish signs, even as oil futures whipsawed with investors digesting the latest updates from the developing situation between Russia and Ukraine,” states the news.

Additional quotes

The premium of Brent oil’s front-month contract to the second month -- known as prompt timespread -- expanded further after reaching the widest bullish backwardation structure since 2019 earlier this week.

Spreads are typically a good indicator of underlying supply-demand dynamics, while individual futures contracts can gyrate on jitters including geopolitical risks.

Physical oil markets across the world have tightened as stockpiles dwindle and consumption rebounds.

While American producers are boosting output as futures near $100 a barrel, OPEC+ suppliers are consistently falling behind their output targets.

Demand has improved as more economies reopen, though energy costs and inflation may soon rise to levels that erode use.

Market implications

The news joins comments from Executive Director of the International Energy Agency (IEA) Fatih Birol to help WTI crude oil to stay mildly bid around $90.50. That said, EIA’s Birol mentioned, “Hope additional oil output from the US and Brazil will ease pressure on prices.”

Also supporting oil prices could be comments from Ukraine Defense Minister who said, “Latest threat assessments are consistent with earlier views and do not contain anything unexpected.”

Read: WTI pares biggest daily losses in 10-weeks, focus on China inflation, Russia, Fed Minutes