While an ongoing surplus of readily available (prompt) cargoes has kept the price differences (differentials) for North Sea crude oil relatively stable at levels not seen for several months, there’s a sense of optimism among traders for a future price recovery, reports S&P Global.
Outstanding Offers
The arrival of a significant volume of WTI Midland crude oil cargoes in Europe during May and June 2025 is identified as a key factor contributing to the weakening differentials of other crude oils within the Dated Brent basket. This influx has created a challenging environment for sweet crude grades to find buyers at favorable prices.
Platts, a part of S&P Global Commodity Insights, assessed the differential for WTI Midland on a CIF Rotterdam basis at a premium of 69.5 cents per barrel to Dated Brent on May 14th. This level is close to a three-month low of a 67-cent/b premium, reflecting persistent strong offering activity in the Platts Market on Close (MOC) assessment process.
Notably, recent MOC sessions have witnessed some of the highest numbers of outstanding offers for WTI Midland since its inclusion in the Dated Brent basket in 2023. The peak was reached on April 29th with nine outstanding offers.
Market sources suggest that this strong supply is at least partially responsible for the trend of relatively early public cargo nominations into the Cash BFOE chaining mechanism. The lack of attractive bids for WTI Midland in the over-the-counter (OTC) market is incentivizing sellers to place these early-June Midland arrivals into the public chains.
Market Recovery
The Brent paper complex is reflecting an anticipated market recovery, even with strong prompt availability. This is evident in the Brent CFD (Contracts for Difference) market structure, which has shifted from a strong contango across May contracts to a backwardation for June contracts.
On May 14th, Platts assessed the nearer-dated May 12-16 Brent CFD at a discount of 39 cents per barrel compared to the May 26-30 contract. In contrast, the prompter June 2-6 contract was assessed at a premium of 14 cents per barrel over the later June 9-13 contract.
Brent CFDs indicate market participants’ expectations regarding the physical value of Brent crude in the coming weeks by reflecting the perceived price difference between prompt (near-term) and forward oil within the Brent complex.
Typically, the derivatives market for oil is in backwardation, where prompt oil is valued higher than forward cargoes. However, during periods of market weakness or oversupply, this structure can invert to a contango, with contracts settling across a period of anticipated slackness in physical fundamentals converging in value. The current shift back into backwardation for June suggests an expectation of tightening fundamentals and potentially higher spot prices in the near term.
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Source: S&P Global
