December 1, 2023

A small contango born out of COVID 19 Third Wave

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Physical crude markets are indicating that demand is lower, much more so than the futures market

Brent spread flipped into a small contango. Contango is a situation where the futures price of a commodity is higher than the spot price.

Reason: Physical crude markets are indicating that demand is lower, much more so than the futures market.

Background: a. New pandemic curbs; b. Slow vaccine rollouts in Europe

Boris Johnson has warned the effects of a third wave of coronavirus will “wash up on our shores” from Europe.

Extended lockdowns are being driven by the threat of a third wave of infections, with a new variant of the coronavirus on the continent. Continental Europe is tightening the coronavirus measures and thereby further restricting mobility.

This is likely to have a correspondingly negative impact on oil demand.

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