The US benchmark WTI crude prices will experience pressure due to high seasonal stock levels, growing production and fall in refinery maintenance over the next two months and potentially shift WTI into contango, a report by Barclays said. Assuming maintenance proceeds as scheduled, imports remain elevated, and global product demand remains lacklustre, US crudes could come under pressure, raising the likelihood of a contango forming in WTI.

(Contango is a situation in futures market when far month contracts are priced higher than near month contracts. Backwardation is the normal trend when near month contracts are priced higher than far month.)

The supply and demand balance continues to look weak. Light crude production is set to grow in the coming weeks with the restart of the Buzzard field (200 kb/d) and Libyan production progressing towards 800 kb/d. Growing production juxtaposed with weak demand has made it difficult for producers to place barrels, as demonstrated by contango in the Brent and Dubai curves, as well as further cuts to Saudi OSPs.

Crude oil experienced a bumpy ride last week as soft fundamentals and escalating tensions in Eurasia sparked price volatility. Last week, EIA statistics showed a smaller–than-expected (905 kb) draw in US crude stocks, resulting from slower refinery runs and higher imports. The most notable decline in crude oil throughput came from PADD 3, which dropped 150 kb/d. Imports remained elevated, climbing 40 kb/d, to 7.68 mb/d. Crude stocks were near the top of the 5-year range.
Source: Barclays