Brent Crude Stabilizes After Steep Weekly Losses on Global Surplus Expectations

Macroeconomic Weakness in Europe

The European economy continues to show signs of weakness, with key manufacturing data pointing to contraction. This is limiting regional demand for distillate fuels, which disproportionately affects Brent. This soft consumption picture reinforces the bearish sentiment derived from global supply forecasts.

Contango Market Structure

The Brent futures market structure is currently in 'contango,' where near-term prices are lower than those for future delivery. This structure signals a bearish view, as it incentivizes traders to buy crude now and place it in storage, confident that future prices will cover storage costs and deliver a profit.

Geopolitical Floor

Despite the prevailing bearish fundamentals, Brent remains slightly more sensitive to geopolitical risk than WTI, maintaining a consistent spread. Incidents like the US interception of a Venezuelan tanker or attacks on Russian-tied vessels inject volatility but fail to reverse the underlying trend of oversupply.