Physical Oil Swaps Point to a Market That’s Only Getting Tighter
- Contracts for North Sea, Russian barrels strengthen sharply
- Rally indicates tight supply for some of Europe’s main crudes
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The physical supply of oil in northwest Europe is looking increasingly constrained as barrels from the North Sea get shipped out to Asia and Russia cuts the flow of cargoes dramatically.
Contracts that indicate the strength of Dated Brent, a physical benchmark for North Sea oil used to settle millions of barrels a day of crude transactions, are currently trading in a pattern known as backwardation. The structure, in which oil refineries are prepared to pay premiums to procure immediate barrels, is the most bullish it’s been since March 6. Derivatives linked to Russia’s main export grade are also stronger on the back of a dwindling export program.