Brent forward curve temporarily flattening – Commerzbank

The oversupply on the Oil market had put significant pressure on the prices of Brent forward contracts with short-term maturities in recent weeks: the backwardation that was still pronounced just a month ago has decreased noticeably, Commerzbank's commodity analysts Barbara Lambrecht and Carsten Fritsch report.

Gasoil market showing signs of tightness

"For a short time, the 6-month contract was even trading higher than the front month, i.e., in contango. However, in the wake of the recent rise in Oil prices, backwardation has strengthened again noticeably. The next due Brent forward contract is now trading $2 above the contract due in six months, bringing the price premium almost back to the level seen a month ago. This reflects a possible reduction in Oil supplies from Russia as a result of US sanctions."

"Backwardation at the front end of the forward curve had also flattened noticeably on the gasoil market. However, the curve did not turn into contango here, as the tighter Russian diesel supply is also indirectly causing a shortage on the European diesel market. Ukrainian drone attacks on Russian refineries have reduced their diesel production capacity. According to the IEA, Russia exported only 720,000 barrels of gasoil per day in September, down from 800,000 barrels in August."

"In September 2024, gasoil exports had even reached 840,000 barrels per day. Since October 1, there has also been an export ban for resellers. The tight market situation is also reflected in the widening of the gasoil crack spread to $27 per barrel. This, combined with the recent rise in the price of Brent, caused the price of gasoil to rise again to a good $700 per ton."