Oil costs edged decrease yesterday with ICE Brent settling 0.9% decrease on the day amid issues over tariffs, with the 1 August deadline quick approaching. In the meantime, expectations that the market will transfer into a big surplus later within the yr are producing extra headwinds for the market, ING’s commodity consultants Ewa Manthey and Warren Patterson be aware.
Oil market goes to be in a big surplus in 4Q25
“Nevertheless, one should ask whether or not the massive surplus the market anticipated within the fourth quarter will materialise. Whereas our oil stability signifies that the oil market can be in a big surplus in 4Q25, the ICE Brent ahead curve tells a barely completely different story. If we forged our minds again 2 months, the ahead curve had an attention-grabbing form. It was in backwardation by till the November 2025 contract after which in contango from that time on. This mirrored expectations for a surplus market from the fourth quarter onwards.”
“Quick ahead to right this moment, and the form of the ahead curve has modified fairly drastically. It’s in backwardation into early subsequent yr, then primarily flat for a big a part of 2026, earlier than shifting right into a shallow contango by 2027. The ahead curve just isn’t screaming that there can be a big surplus of the type our stability sheet and lots of others present. The Dec-25 – Dec-26 unfold additionally highlights this. The unfold is shifting from a contango of greater than US$1.80/bbl in early Might to a backwardation of round US$0.65/bbl at the moment. Whereas we imagine the excess will nonetheless hit the market, comparatively low inventories provide some assist not simply to timespreads, but in addition the flat value.”
“Numbers in a single day from the American Petroleum Institute present that US crude oil inventories fell by 577k barrels over the week, whereas crude shares on the WTI supply hub, Cushing, elevated by 314k barrels. Gasoline inventories fell by 1.2m barrels as we transfer by the summer time months, a interval of seasonally stronger demand. Distillate shares elevated by 3.5m barrels. It will provide some reduction to the center distillate market, which has been trying more and more tight. The extra extensively adopted stock report from the Vitality Data Administration can be launched later right this moment.”
