The world oil market is faced with a contango situation – fuel supplies in the coming months are cheaper than in subsequent ones. The key reason for the contango is the slowdown in global economies amid the energy crisis, as well as the return of severe covid restrictions in China, which also slows down economic growth. The Bloomberg agency, which analyzed several stock indicators at once, tells about the change in trend in the global oil market.
Due to a new outbreak of coronavirus in China, demand for oil in Asia fell to a seven-month low. One of the indicators that the agency is talking about is the premium in the price of oil futures for oil supplies from Oman to oil swaps for oil from the UAE. The difference in price between stock instruments fell below the dollar, and over the past month – by 80%. A futures contract involves the supply of oil in the future (usually next month), and a swap contract involves an exchange for a commodity in the near future (in accordance with the terms of the instrument).
Negative dynamics in the most popular oil futures Brent and WTI, according to the agency, also confirms the slowdown in demand for oil around the world and contributes to lower oil prices. In the European and American markets, there is a contango situation similar to the Asian one, which indicates the sufficiency of supply in the market. Determine the dynamics of oil prices in the world, according to the agency, in the near future will be China, as the main consumer of energy resources on the planet.
However, a sharp increase in demand is not expected in the near future. In China, a new powerful outbreak of coronavirus is recorded, the largest cities are closed for quarantine, which will lead to a decrease in consumer demand, a slowdown in GDP growth and, as a result, a decrease in energy demand. At the moment, world oil prices are trading at the level of the beginning of 2022, a barrel of Brent oil with the nearest delivery costs about $86.5.
The state of the oil market is an extremely important metric for the Russian authorities, whose budgetary possibilities directly depend on the supply of energy resources to foreign markets. Oversupply in the market in the near future may lead to a partial refusal of Russian oil due to the risks of sanctions, which come into force on December 5. Now consumers will be able to get even bigger discounts out of Russia to meet their own needs – the market situation will favor this.
Western countries will soon have to announce the size of the oil price ceiling, at the moment prices are being discussed at the level of $65-70 per barrel, however, some European countries still resist and demand to lower it because of the "relatively comfortable level for Moscow" .