U.S. Crude Curve Risks Flipping as Release of SPR Barrels Looms
- WTI front-month spread plunges ahead of reserves release
- Curve flipping to contango could deter some investor flows
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A wave of emergency oil supplies are set to hit the U.S. starting in May and threatens to turn the market on its head, going from severely undersupplied to oversupplied in a matter of months.
U.S. crude for immediate delivery this week sank to trade just 30 cents above the next month, the smallest premium since January, as traders fear the Biden administration’s move to release millions of barrels of supplies will create a temporary glut. That could in turn push the curve into contango, a market structure that signals oversupply where prices for prompt delivery trade at a discount to those for delivery in the future. The prompt spread traded as high as $5.26 a barrel last month in backwardation.