Commerzbank analysts Barbara Lambrecht and Carsten Fritsch report that the Brent forward curve has temporarily flattened amid oversupply pressures in the oil market. Backwardation, which had been pronounced just a month ago, has eased noticeably for short-term Brent contracts, reflecting recent volatility in supply and pricing conditions.
Short-term contango observed amid rising Brent prices
For a brief period, the six-month Brent contract traded above the front-month contract, entering contango territory. However, as oil prices rebounded, backwardation at the front end of the curve strengthened again. The next-due Brent forward contract now trades roughly $2 above the six-month contract, nearly restoring the premium seen a month ago. Analysts attribute this shift to potential reductions in Russian oil supply stemming from US sanctions.
Gasoil market shows signs of tightness
The gasoil market has also experienced a temporary flattening of backwardation, though it did not shift into contango. Tight Russian diesel supplies, exacerbated by Ukrainian drone attacks on refineries, have constrained European diesel availability. According to the International Energy Agency (IEA), Russian gasoil exports fell to 720,000 barrels per day in September, down from 800,000 barrels in August and 840,000 barrels per day in September 2024.
Since October 1, an export ban for resellers has further tightened the market. The constrained supply, combined with rising Brent prices, has pushed gasoil prices above $700 per ton, while the gasoil crack spread has widened to $27 per barrel, reflecting robust demand relative to limited supply.
