Finance
Oil price structure narrows, premiums fall as supplies rise, summer demand ends
Published by Global Banking & Finance Review®
Posted on August 14, 2025
3 min readLast updated: January 22, 2026
Global Banking & Finance Review®
Company
Published by Global Banking & Finance Review®
Posted on August 14, 2025
3 min readLast updated: January 22, 2026
Oil price premiums are falling as global supplies rise and summer demand ends, influenced by OPEC+ decisions and regional dynamics.
By Florence Tan, Georgina McCartney and Robert Harvey
SINGAPORE/HOUSTON/LONDON (Reuters) -Premiums for prompt benchmark oil prices globally are falling compared with those in future months on rising output from the Middle East, Latin America and Europe, just as peak summer demand ends, traders and analysts said on Thursday.
Easing concerns that the U.S. could impose more sanctions on Russia and further disrupt oil supplies are also weighing on oil prices, they said.
The six-month time spreads for Brent futures, U.S. West Texas Intermediate futures and Middle East marker Dubai have narrowed by more than $1 a barrel in backwardation since the start of the month.
Backwardation refers to a market structure where prompt prices are higher than those in future months, indicating tight supply. A narrowing of the structure indicates a market view that supplies are expected to rise.
"Brent and Dubai time spreads are softening mainly on expectations of incremental OPEC+ supply from September and easing fears of Russian disruption after recent steady flows via both Baltic and Black Sea," said Shohruh Zukhritdinov, a Dubai-based oil trader.
"U.S. crude supply remains stable, but refinery runs will gradually decline into the shoulder season, easing prompt tightness," he said.
U.S. President Donald Trump and Russian President Vladimir Putin will meet in Alaska on Friday to strike a ceasefire deal in Ukraine.
Citi analysts said Brent could land in the low-$60s per barrel area, if there is progress towards a U.S.-Russia deal.
RISING SUPPLY, END OF SUMMER
Traders are bracing for more supplies after the Organization of the Petroleum Exporting Countries and their allies, known as OPEC+, agreed to increase September output, just as non-OPEC producers such as Guyana, Brazil and Norway launched new production.
Peak oil demand during the Northern Hemisphere summer is also ending, cooling red-hot diesel margins in Europe and reducing the burning of crude for power in Saudi Arabia, the sources said.
"We saw a lot of selling in the window, with expectation around crude demand revised down as refinery margins weaken as gasoil/diesel cracks unravel," said Harry Tchilinguirian, group head of research at Onyx Capital Group, referring to physical trade in the North Sea market.
"Now that seasonal demand is going to unwind, and we cannot be sure that China will keep up elevated imports (for stockpiling), so where does the extra Saudi barrels go?"
Meanwhile, spot premiums for Middle East benchmarks Dubai and Oman hovered at their lowest in more than a month for October-loading supply. [CRU/M]
Still, Dubai is relatively stronger than Brent, keeping the price spread between the benchmarks - known as the Exchange of Futures for Swaps - narrow and allowing Atlantic Basin supply to head to Asia.
Asian refiners have already snapped up millions of barrels of oil from the United States, Africa and Europe for delivery in September and October.
Neil Crosby, analyst at Sparta Commodities, said there is still uncertainty over Russian supply with the world's third-largest oil importer India buying spot cargoes to replace Russian oil in recent weeks.
"Some (Russian) Urals will go to China but the story is not over yet and there is still some tail risk over what happens to Russian (oil) that cannot clear which makes the EFS trade short term even trickier than normal," he said.
(Reporting by Florence Tan and Siyi Liu in Singapore, Robert Harvey in London and Georgina McCartney in Houston; Editing by Tom Hogue and Michael Perry)
The decline in oil premiums is attributed to rising output from the Middle East, Latin America, and Europe, along with easing concerns about U.S. sanctions on Russia.
OPEC+ has agreed to increase output in September, which is expected to contribute to the softening of Brent and Dubai time spreads.
U.S. crude supply remains stable, but refinery runs are expected to decline as the market transitions into the shoulder season, easing prompt tightness.
The end of peak oil demand during the Northern Hemisphere summer is cooling diesel margins in Europe and reducing crude burning for power in Saudi Arabia.
There is uncertainty over Russian oil supply, especially with India purchasing spot cargoes to replace Russian oil, indicating ongoing market volatility.
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