After the strong drop in oil prices, temporary differentials, that is, price differentials over the term curves, were also significantly reduced last week, says Carsten Fritsch, commerzbank raw material analyst.
Brent temporal differentials are drastically reduced due to oil price drop
“The difference between the next Brent contract and the contract that expires in one year was temporarily more than 1 $. The last time the price difference between these two contract maturities was lower was in December 2023. At the end of March, it was still at 5 $.”
“The smallest price premium for oil with short -term delivery suggests expectations of a more relaxed oil market, although the price difference was extended again to more than 2 $ at the end of last week. It is worth noting that the price gap between the first two Brent -term contracts was again 75 cents on Friday and, therefore, at a level similar to the one in the end of March.”
“An accounting structure, that is, a term of the Brent on the rise, only exists from the spring of 2026. In view of the excess supply that is brewing, this would have been expected in an earlier time.”
Source: Fx Street
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