PL:ICE Brent crude futures flip into contango on IEA stock release
Brent crude futures on London's Intercontinental Exchange flipped into contango Friday for the first time since March a day after the International Energy Agency shook the market by announcing it would release 60 million barrels of oil over the next month from emergency stockpiles.
August ICE Brent was trading at $107.20/barrel by 0930 GMT Friday, a $0.07/b discount to the September contract, down from a premium of $0.16/b at 1530 GMT Thursday, data from the exchange showed.
The September ICE Brent contract was trading at a $0.22/b discount to October, down from a premium of $0.05/b at 1530 GMT Thursday.
The move will likely have repercussions in the Brent physical market, which has been trading in backwardation since end-March, said traders. "We're waking up to a new world," one said. "I've no idea whether this is here to stay."
"CFDs seem to be coming off...the contango could all be a bit of a flash in the pan though," a second trader said.
Christophe Barret, Credit Agricole global oil analyst, said: "What happened with the IEA they put in the market suddenly 60 million barrels of sweet crude, maybe some products, so they changed completely the rules of the game."
"If you have a spread flipping into contango it means that you have absolutely no tension on the front-month because refineries can use the stocks for their own processing."
In oil, contango is usually a feature of weak markets as supply for near-term delivery is deemed to outweigh supply available in the future.
Dated Brent -- the contract used to value the majority of the world's oil -- was assessed at $108.145/barrel Thursday, its lowest level since February 2, following the International Energy Agency's decision to release emergency crude stockpiles to the market.
The contract was assessed more than $5.60/b below Wednesday's level of $113.785/b, the biggest one-day fall in the outright price since May 5, Platts data showed.
The IEA announced a release of 60 million barrels of oil held in emergency stockpiles by its member countries in response to the disruption of supplies from Libya.
IEA members have agreed to release 2 million b/d of oil for a period of 30 days, the IEA said in a statement, in what will only be the third stock release in the agency's history.
