According to Bloomberg data, the premium of Brent crude oil to US WTI crude oil futures rose to its highest level since October 2015. Ole Sloth Hansen, head of commodity strategy at Saxo Bank, said Brent crude is currently in a "spot premium."
The market structure of “spot premium†is seen as a signal of tight supply and strong demand. Hansen said that in recent days, Brent crude oil futures have begun to show that traders believe that the oil market is beginning to show signs of initial balance, spot oil prices will continue to rise in the coming months.
Last week, Brent crude oil futures for October delivery rose nearly 20 cents from December last year and 9 cents from April last year. Although the rest of the forward curve is the futures premium (when the future delivery price is higher than the spot price), if the spot premium remains the same, it will mean that the inventory is expected to continue to fall, which may lead to an increase in oil prices. However, some analysts have warned that this may be another false signal.
A series of positive data showed that US oil inventories continued to decrease, while demand in the summer months exceeded expectations, which boosted the market and triggered a rebound in oil prices since July.
According to data released by the US Energy Information Administration (EIA) on Wednesday, as of the week of August 11, US crude oil inventories fell by 8.95 million barrels, the largest since the week ended September 2 last year. Crude oil inventories fell to 466.5 million barrels, the lowest since January 2016.
Paul Horsnell, global head of commodity research at Standard Chartered Bank, said that if there are stronger numbers every week, it will be difficult to have any negative effects.
William O'Loughlin, investment analyst at Rivkin Securities in Australia, said, "If stocks continue to decline at this rate, they will fall below the five-year average in about two months."
He added, "The rate of decline indicates that OPEC production has played a role, but current oil prices indicate that the market is questioning the longer-term prospects of oil market rebalancing."
Supply and demand are still out of balance. However, for oil traders, although concerns about the plunge in oil prices have slowed down, the possibility of oil prices breaking through $50/barrel seems unlikely.
Many analysts said that the current market tension mainly reflects the convergence of several seasonal factors, from the high oil prices in the Middle East in the summer months to the use of air conditioners, to the Americans to fuel their cars more.
JPMorgan analyst David Martin pointed out that as the US driving season is coming to an end, more and more refineries will close in the next few weeks, which means crude oil purchases may be close to their seasonal peaks.
Supply is still strong. In July of this year, the largest production of Saudi Arabia's largest oil producer Saudi Arabia exceeded its promised limit for the first time. Previously, as the de facto leader of the OPEC organization, Saudi Arabia had joined other countries in putting pressure on countries with weak production to comply with the production reduction agreement.
Analysts say concerns about rising production in the future are weakening the stronger anti-spot premium. Oil production outside OPEC is rising, and rising oil prices may release more production from shale fields in the United States. Global oil inventories will still reach 219 million barrels, higher than the global oil producers' production reduction targets. JBC Energy analyst Michael dei-michei said that the increase in the number of active US rigs this year means that production will continue to rise. The optimism of watching more oil prices will not continue.
Wenzhou Xinheda Trade Co., Ltd , https://www.pop-eyewear.net