Brent's forward curve has slipped into contango for the first time in 2026, with the front-month contract trading below later deliveries. Rising shipments through the Strait of Hormuz have left a near-term glut, and analysts say the current mild structure limits the case for storing barrels.
Brent crude for prompt delivery traded this week below contracts for delivery as far as six months out, a signal that increasing shipments through the Strait of Hormuz have created a near-term glut. The front-month September contract traded below each of the next five contract months on Friday, after slipping under the second month last week.
The curve tips into contango
That shape has a name. When prompt oil trades below oil delivered later, the market is in contango — a sign that investors see current demand as weak while ample supplies persist. The six-month Brent spread flipped to a discount for the first time this year on Wednesday, dropping to minus 56 cents a barrel on Thursday before recovering to a small premium on Friday.
The reopening of the strait sits behind the move. As tankers exit the waterway again, freshly released crude is meeting demand that buyers have already covered. According to Reuters, ICIS global oil markets lead David Jorbenaze said: "The newly released crude is chasing demand that has already been reduced and met", explaining why the front of the curve is taking the hit.
To store or not to store
Contango normally rewards traders who buy barrels now, store them, and sell them forward at a higher price. That could offer respite to sellers competing to place cargoes in a weak physical market, while helping to replenish inventories drained during the supply crisis linked to the Iran war.
But the incentive only works if the gap is wide enough. Storage plays turn a profit when contango covers the storage and financing fees, around 80 cents to $1 per barrel for firms without their own tanks, one European crude trader said. Whether the structure deepens or fades depends on whether demand in Asia starts to pick up again, SEB analyst Bjarne Schieldrop said, adding that storage plays will stay limited given the current mild contango.
Source: Reuters
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