Oil glut trade on brink of a return; Brent crude falls below $40

By Administrator_India

Capital Sands

The combination of a stalling Asian demand recovery, the end of the US summer driving season, and increased supply from the Opec+ alliance are signaling a bleak short-term outlook for oil prices. The global Brent crude benchmark is currently trading quite deeply in a bearish pattern known contango, where the most immediate prices are far below those for contracts for supply in later months. The discount has gotten so big that it appears to cover the nominal cost of hiring 1,200-ft long supertankers. In other words: Traders can buy cargoes now, stash them on ships, and sell them later at a profit.

An oil trade that only works when the market is glutted may be about to make a comeback. That’s bad news for producers withholding near-record amounts of crude in a coordinated bid to help prop up prices. Crude futures in London, on Tuesday, fell below $40 a barrel for the first time since June 25. Brent crude was trading at $39.73 per barrel, down 5.43 per cent at 7.47 pm IST.

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