As oil prices fall, the bullish structure of the oil market is quickly fading

On September 10th, Golden Data reported that the bullish market structure of Brent crude oil has almost completely disappeared for the first time in many years. The near-month Contract Trading price of Brent crude oil futures is only a few cents higher than the contract price in 2031. A year ago, the price difference between the front and back ends of the crude oil futures curve exceeded $20 per barrel. Part of the reason for the decrease in the price difference is the expected oversupply in the market next year, but the trading dynamics have also changed, exacerbating the drop in oil prices to the lowest level since 2021. Since the end of 2020, the front two years of the Brent crude oil futures curve have been in a bullish structure, meaning that traders are willing to pay a higher price for oil in the short term than in the future. OPEC and its allies were forced to postpone their planned production increase last week, indicating a significant supply cushion in the global market. Meanwhile, speculators led by Algorithm-driven traders have the most pessimistic stance on oil in over a decade, further amplifying price fluctuations. Rebecca Babin, Senior Energy Trader at Private Wealth at the Imperial Bank of Commerce in Canada, said, 'I believe the downward shift in the curve reflects the rise in idle capacity. With OPEC delaying the resumption of production, idle capacity is increasing, and people are concerned about excess capacity in 2025.'