Brent Crude Futures Enter Deepest Contango Since December 2023

The discount of Brent crude front-month futures relative to the six-month contract reached its lowest level since December 2023 on Monday. This move reflects a growing perception of abundant supply as OPEC+ and other producers increase output.

The front-month Brent contract traded up to US$0.44/b below the six-month contract. It first moved to a discount against the six-month contract on Oct. 16, the first time since May.

A market structure where the price for immediate supply is lower than for later delivery, known as contango, typically signals a perception of abundant near-term supply and weakening demand.

Both the Brent and WTI markets spent much of the year in the opposite structure, called backwardation, where prices trade at a premium for immediate supply compared to later delivery. Backwardation typically reflects a perception of scarce short-term supply and robust demand.