Tight oil market blows out Brent futures price structure

The oil market is tightening as Saudi Arabia and Russia are set to throttle output over the coming months, the structure of the global Brent crude oil benchmark indicated on Tuesday.

Front-month Brent futures contracts traded as high as $4.68 a barrel above those for delivery six months further out on Tuesday, a spread last seen in November last year.

A sharper price structure where prompt contracts command premiums to those for later delivery indicates oil traders perceive a tightly-supplied market.

Brent benchmark futures traded above $92 a barrel on Tuesday for the first time since mid-November, after the Organization of Petroleum Exporting Countries (OPEC) held firm with its 2.44 million barrels per day (bpd) and 2.25 million bpd demand growth forecasts for this year and next respectively.

Saudi Arabia and Russia’s announcement last week to extend voluntary output cuts worth 1.3 million bpd of crude supply to the end of this year propelled oil prices to 10 month highs.

Persistent concerns around macroeconomic slowdowns across the globe could be creating a ceiling for further price gains.

However, oil prices could yet make a run towards the $100 a barrel level if macroeconomic data from Europe or China improves, said OANDA market analyst Edward Moya.

Investors will be closely watching the release of August U.S. consumer price index data on Wednesday, which could provide some insight into potential future interest rate moves.
Source: Reuters (Reporting by Robert Harvey Editing by Alexandra Hudson)