North Sea Oil Rig Work Pushes Up Price of Supplies This Summerby
June futures trade as high as 3-cent premium to July on ICE
BP, ConocoPhillips plan work on fields feeding Ekofisk blend
Front-month Brent crude traded in backwardation for the first time since January as scheduled maintenance at North Sea fields is seen curbing European supply.
Brent for June settlement rose as high as 3 cents above the July contract Thursday on the London-based ICE Futures Europe exchange, before settling at a 6-cent discount. The last time the first and second months settled in backwardation, a situation where prompt prices are higher than those for later delivery periods, was Jan. 14.
Field closures are scheduled to occur at the same time refineries in the Atlantic basin typically bolster operating rates to meet summer gasoline demand. ConocoPhillips said it plans ‘significant’ maintenance at both Ekofisk and J-Area oil fields without specifying dates. The Ula, Valhall and Tambar fields will halt for summer work coinciding with Ekofisk, BP Plc said in an e-mailed response to questions Wednesday.
"We have two things happening at the same time," said Mike Wittner, head of oil markets at Societe Generale SA in New York. "There’s maintenance in the North Sea that will trim supply in June when we’re getting into a period of higher demand from refineries. For once there’s a straightforward explanation."
The market has been in contango, a structure that may signal weak near-term demand or rising supply, for most of the past 21 months.