Oil investors appear to be adjusting expectations for tighter crude supplies later in the year, with the gap between near-term and forward contracts narrowing despite plans by OPEC+ to cut production further.
The spread between spot prices and six-month futures has narrowed sharply over the past week, suggesting that investors are easing concerns about supply shortages later in the year.
“The past few days have reflected a very fragile sentiment in the oil market,” said UBS strategist Giovanni Staunovo. “Prices are driven more by supply news and demand growth concerns.” The spread between the front-month Brent contract and the six-month contract hit $1.10 a barrel on Tuesday, the weakest since March.
The spread between WTI’s front-month and six-month contracts also narrowed to $0.45. “The recent sharp reduction in the speculative net long position in WTI is not so much due to long unwinding, but rather a genuine turn of bearishness on the outlook for the U.S. crude oil market,” said PVM analyst Tamas Varga.
