Oil Prices Come Under Pressure as Brent Futures Decline 5% Week on Week

Oil prices have come under pressure in recent weeks, according to analysts at BMI, a unit of Fitch Solutions. In a report sent to Rigzone, they noted that Brent futures were down around five percent week on week due to several factors, including the rollover from November to December expiry in the front month contract in a steeply backwardated market.

The analysts also pointed out that bearish news flow around rising exports from the Middle East Gulf and the restart of the East-West pipeline, as well as some optimism over the potential for a U.S.-Iran deal, have contributed to the decline. However, they warned that other market indicators show continued signs of strain.

The term spread remains deep in backwardation and physical barrels are holding sizeable premiums to paper barrels, both typically a marker of fundamental tightness. In particular, diesel prices have reached new record highs once again this week and there are signs that this is starting to put more upward pressure on the price for gasoline.

Naeem Aslam, CIO at Zaye Capital Markets, noted in his analysis that the oil market is currently balancing two opposing forces. Supply disruptions and geopolitical risk are keeping a premium in crude, while recovering Gulf exports and concerns about future demand are limiting a cleaner breakout higher.