Connect with us

Business

US Oil Futures Point to Oversupply for First Time This Year

News Agencies

Published

on

(Bloomberg) — The US crude market’s structure is signaling oversupply for the first time in almost a year, the latest indicator of the scale of the dramatic slump in the nearest section of the oil futures market.

Most Read from Bloomberg

The front-month spread, which reflects short-term supply-demand balances, traded in contango — the industry term for the bearish market structure — ahead of the December contract’s expiry on Monday. One other subsequent spread also flipped to contango. The rest remain in the opposite bullish structure, known as backwardation, indicating the move could yet be a short-term one.

Much of the move can be attributed to futures traders amassing a bloated long position and heading for the exits at the same time as headline prices plummet due to demand worries, market participants said. Underlying physical market weakness and short-term factors such as a Texas pipeline outage and high freight rates have also led to the collapse in timespreads, while West Texas Intermediate futures fell below $80 for the first time since September.

Friday’s plunge also coincides with the expiry of options contracts on the December-January spread. There are almost 13 million barrels of put options that would profit if the spread expires in contango. When options move through the levels at which they pay out, they can spur additional selling.

“Bottom line here is that demand for oil out of Asia isn’t good and while it may be decent in the US, it’s struggling with the pipe outage that slows exports and generates weakness that may last for a few weeks,” said Scott Shelton, an energy specialist at TP ICAP Group Plc. “The market positioning was the exact opposite, which has forced liquidation and made this even worse.”

Contango can make it more profitable for traders with access to storage to put oil in tanks and sell at a later date, depending on the extent of the the gap between prices. If oil markets are in contango over a sustained period, it also generates so-called negative roll yield, where investors tend to lose money when they roll a position forward from one month to the next.

The weakness in US light-sweet crude prices has shown up in physical markets in recent days. Crude at Magellan Midstream Partners LP’s East Houston terminal is trading at the softest level since May, according to Bloomberg fair value data. Permian oil is also at a near-six-month low, the data show, with a vital regional oil pipeline run by Shell Plc running at reduced rates.

(Updates with more information throughout.)

Most Read from Bloomberg Businessweek

©2022 Bloomberg L.P.

Continue Reading
Advertisement

Breaking News

Advertisement

Editor Pick’s

Latest Entertainment

Iqra Aziz did not feel relaxed working with Feroze Khan Iqra Aziz did not feel relaxed working with Feroze Khan
Entertainment3 hours ago

Iqra Aziz did not feel relaxed working with Feroze Khan

Pakistani drama Actress Iqra Aziz says she did not feel relaxed while working with actor Feroze Khan. In the program...

Entertainment11 hours ago

‘Everything Everywhere All At Once’ Wins Best Feature at Gotham Awards

The 32nd annual Gotham Awards have wrapped and big winners of the night were “Everything Everywhere All at Once,” and...

Entertainment11 hours ago

Gotham Awards 2022: Winners List (Updating Live)

The 32nd annual Gotham Awards is underway (watch it live here) the celebration that marks the official start of awards...

Entertainment11 hours ago

Gotham Awards 2022: Full Winners List

The 32nd annual Gotham Awards have wrapped and big winners of the night were “Everything Everywhere All at Once,” and...

Entertainment11 hours ago

Nick Holly, Manager and Co-Creator of ‘Sons & Daughters,’ Dies at 51

Nick Holly, a manager, writer and producer who co-created the ABC comedy series “Sons & Daughters,” died Nov. 21 of...

Entertainment12 hours ago

Billie Eilish opens up about boyfriend Jesse Rutherford: ‘I’m really happy about it’

Billie Eilish and Jesse Rutherford attend the LACMA Art+Film Gala at Los Angeles County Museum of Art in Los Angeles...

Entertainment14 hours ago

Jennifer Lopez reflects on Ben Affleck split: ‘I honestly felt like I was going to die’

Jennifer Lopez celebrates 20th anniversary of This Is Me…Now and reflects on Ben Affleck relationship. (Photo: Barcroft Media via Getty...

Entertainment15 hours ago

Collin Gosselin says reality TV affected relationship with mom Kate: ‘I think it tore us apart’

Kate and Jon Gosselin’s son Collin is opening up about his mom. The 18-year-old, who appeared on the reality show...

Latest Sports

Sports24 mins ago

Week 13 Fantasy Football Waiver Wire Pickups: The return of Ja’Marr Chase, J.K. Dobbins & Deshaun Watson

Matt Harmon and Andy Behrens spent most of this podcast avoiding talking about what is available on the fantasy football...

Sports44 mins ago

Jim Harbaugh downplays Michigan’s flag plant: ‘I want to get that flag’

Jim Harbaugh brushed off any questions surrounding what Michigan did during its postgame celebration after the Wolverines' 45-23 victory over...

Sports1 hour ago

Kyle Shanahan responds to Raheem Mostert’s 49ers injury mismanagement claim

Kyle Shanahan responded to Raheem Mostert's claim that the 49ers attempted to pressure him out of having season-ending knee surgery...

Sports2 hours ago

Fantasy Football: Early waiver wire pickups for Week 13

Check out two players to consider pursuing on the waiver wire in fantasy leagues ahead of Week 13.

Sports2 hours ago

Jones, Maddux, Morris consider Bonds, Clemens for Hall

Sixteen members of the contemporary baseball era committee will meet to consider the Cooperstown fate of an eight-man ballot.

Sports2 hours ago

Steve Kerr, Warriors view James Wiseman’s G League assignment as ‘long term’

Steve Kerr spoke about James Wiseman's development prior to the Warriors' game against the Timberwolves on Sunday.

Sports3 hours ago

World Cup 2022: Cameroon GK Andre Onana misses Switzerland match, reportedly leaves team after disagreement with coach

Andre Onana is reportedly no longer with the national team after he disagreed with the coach's defensive tactics.

Sports3 hours ago

Patriots owner Robert Kraft gives Devin McCourty special gift before 200th game

Devin McCourty will reach a special milestone Thursday against the Bills, and Patriots owner Robert Kraft presented the veteran safety...

Technology Hot News

Is Elon Musk Really Going to Buy Twitter? Is Elon Musk Really Going to Buy Twitter?
Technology1 month ago

Is Elon Musk Really Going to Buy Twitter?

Elon Musk, the owner of the electric car company Tesla, CEO of SpaceX, and the richest man in the world,...

WhatsApp services were affected across Pakistan, restored after 2 hours WhatsApp services were affected across Pakistan, restored after 2 hours
Technology1 month ago

WhatsApp services were affected across Pakistan, restored after 2 hours

WhatsApp services were affected in various countries of the world, including Pakistan, and India due to this users were facing...

Bitcoin vs Litecoin: A guide to understanding cryptocurrencies Bitcoin vs Litecoin: A guide to understanding cryptocurrencies
Technology2 months ago

Bitcoin vs Litecoin: A guide to understanding cryptocurrencies

Cryptocurrencies currently occupy an odd place in society. They are no longer the super niche bizarre currency beloved by tech...

Personal data of people is selling on Google Play and Google Ads Personal data of people is selling on Google Play and Google Ads
Editor Picks3 months ago

Personal data of people are sold on Google Play and Google Ads

It’s been two to three years since Google has been unknowingly hosting multiple apps from malicious actors who sell personal...

Protonmail is down a second time in the past 24 hours Protonmail is down a second time in the past 24 hours
Technology5 months ago

Protonmail is down a second time in the past 24 hours

An end-to-end encrypted email service Protonmail is down a second time in the past 24 hours, netizens reported on social...

What's better for the student: a tablet or a laptop What's better for the student: a tablet or a laptop
Technology6 months ago

What’s better for the student: a tablet or a laptop

Some analysts argue that computers have outlived their usefulness. There is some truth in this: PC and laptop sales are...

Tesla founder Elon Musk holds the Twitter deal temporary Tesla founder Elon Musk holds the Twitter deal temporary
Technology7 months ago

Tesla founder Elon Musk holds the Twitter deal temporary

USA: Elon Musk, the founder of companies like Tesla and SpaceX, can actually buy anything in the world. Last month,...

How Zafar Supari is utilizing his ability on Snapchat? How Zafar Supari is utilizing his ability on Snapchat?
Technology7 months ago

How Zafar Supari is utilizing his ability on Snapchat?

Pakistan: Zafar Supari a public figure, businessman, and social media sensation has crossed one hundred thirty-three thousand 133k subscribers on...