The price of Brent crude oil futures for prompt delivery rose on Tuesday to a one-month high over the price for oil six months later as traders priced in renewed risks to Middle Eastern supplies and shipping through the Strait of Hormuz.
Market Impact
The first-month Brent contract traded $8.92 a barrel above the sixth-month contract, its largest premium since June 10. This market structure, known as backwardation, is typically viewed as a sign of tight near-term supplies.
The structure contrasts with that in early July, when prompt Brent traded below later contracts, a more common structure known as contango and typically associated with ample near-term supplies. Recovering exports through the strait then eased supply concerns.
According to Saxo Bank head of commodity strategy Ole Hansen, “The return to backwardation signals that the market expects crude availability to remain constrained in the weeks ahead.”
Neil Crosby, head of research at Sparta Commodities, noted that investors are likely pouring back into the market following the latest escalation in tensions between the U.S. and Iran, including renewed military strikes and attacks on vessels near the strait.
Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.
