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Brent futures return to backwardation as Middle East supply risks rise
The September Brent contract traded about $8 per barrel above the six-month contract, the widest prompt premium since June 10, pointing to tighter near-term supply expectations.
Brent crude futures flipped back into backwardation, signaling renewed expectations of tight prompt oil supply after Middle East supply risks returned, OilPrice reported. The move came as the market started pricing in renewed hostilities in the region, tanker traffic collapsed through the Strait of Hormuz, and the US reinstated a naval blockade aimed at Iranian oil exports.
According to data compiled by Reuters, the September Brent contract traded around $85.79 per barrel early on Wednesday, roughly $8 per barrel higher than the six-month Brent contract, which was about $77.49. The first-month premium over the sixth-month contract reached $8.92, the largest premium since June 10.
OilPrice added that both Brent and key Middle Eastern benchmarks such as Dubai, Murban, and Oman sank after the US and Iran announced a memorandum of understanding to launch peace talks and reopen the Strait of Hormuz, alongside the US lifting a blockade in the Gulf of Oman targeting Iranian exports.
In mid-June, easing concerns over prompt crude supply from the Middle East led Dubai and Murban to flip their curve structure to contango for the first time, according to the article.
Latest closeWTI crude $79.90 ▲2.2%|Brent $85.36 ▲2.5%