The Bastion of Oil-Market Bullishness Is Starting to Crack - Bloomberg

The Bastion of Oil-Market Bullishness Is Starting to Crack - Bloomberg:

For much of May, nearly each and every time that oil prices tanked amid concerns about the deepening U.S.-China trade war, one corner of the market held up: timespreads.

The spreads -- the price difference between contracts for immediate delivery and forward ones -- reflected tightness in the physical market, with refineries willing to pay large premiums to secure barrels straight away. As such, the oil curve was in a steep backwardation, where spot crude trades above later contracts.

For most of May, oil refiners bid up the front of the oil curve to keep North Sea crude in north-west Europe in order to replace Urals crude from Russia that was lost due to an unprecedented contamination inside the Druzhba pipeline. Now, as Urals flows slowly restart to some parts of Europe and a plan takes shape for a wider resumption, the tightness in the physical market is starting to ease -- and timespreads are following suit. Refinery cuts in Germany are also helping to reduce demand.