The price of Brent oil at the start of new trading in the global oil market has reached less than $110 per barrel. This price drop indicates a decline of more than $8 compared to the previous price, but further detailed investigations are needed to clarify the real reasons for this change.
Analysis of Oil Futures Trading Structure
The price of $118 prior to the holidays relates to the December 2026 delivery contract, while the new rate of $109.95 has been reported for the January 2027 delivery contract. This price difference is due to the shifting of contract delivery dates and may create a misleading perception of the market situation.
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Backwardation Effect on Prices
In oil futures markets, the prices of contracts for different months are not necessarily the same. When the market faces concerns about short-term supply shortages, near-term delivery oil may trade at a higher price than oil for later months. This situation is known in commodity markets as “backwardation.” In such conditions, changing the basis contract from a closer month to the next month can lead to a decrease in the displayed price on the board, without this decrease meaning an actual drop in price.
Overall, the price difference between short-term and long-term contracts can reflect traders' expectations regarding the future supply and demand situation for oil, ongoing transportation disruptions, and geopolitical developments. Therefore, the return of Brent oil prices below $110 should not be seen solely as an indication of a real price decrease in the global market. For a more accurate analysis, comparing the prices of two contracts with the same expiration is essential.
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