Three Oil Charts Paint Dire Picture of Ballooning Glut 

(Bloomberg) -- Oil’s 24% slump this week might be the start of a prolonged period of pain for some market players, according to several key indicators.

As Saudi Arabia and Russia prepare to pump-at-will in a battle for market share, oil timespreads, tanker rates and other indicators are showing that the industry is struggling with the double whammy of weak demand and excess supply. Here are four charts that illustrate what’s happening.

Cracking Under Pressure

U.S. gasoline margins collapsed on Thursday, falling from near $13 a barrel to about $5. That’s the lowest level for the time of year since the financial crisis in 2008. It follows signs that the gasoline market will be awash with supply this summer as fewer drivers show up at the pump after the coronavirus outbreak.

Super-Contango

The price of prompt oil relative to future deliveries is sinking as the market braces for a flood of crude from some of the world’s biggest suppliers. While the impending deluge is bad for producers, the structure -- known as contango -- allows traders a near risk-free profit from storing crude in tanks or ships. On Monday Brent’s 1-year timespread fell into a contango of more than $10 for the first time since 2015.

Brent’s six-month contango widened to beyond $7 a barrel on Thursday, the largest spread since 2015.

Prices Undercut

The oil spread that helps to dictate the flow of African and North Sea crude to Asia has collapsed following Saudi Arabia’s historic price cuts. The differential between Brent futures to Dubai swaps, or EFS, turned negative and slumped to the deepest discount since 2006, according to data compiled by Bloomberg.

While a pledge by the kingdom to raise output would typically be bearish for Dubai oil, the magnitude of the price adjustment means sellers looking to place sweet crude into Asia will now have to drastically discount their oil against cheaper crudes from the Middle East.

Tanker Tussle

The daily chartering cost of an oil tanker on the Middle East to China route has climbed sixfold since late last week after the collapse of the OPEC+ alliance set the scene for a boost in exports.

Saudi Arabia’s pledge to ramp up crude exports has prompted other OPEC producers such as Abu Dhabi and Iraq to follow suit. This has led to a fixing frenzy by producers, traders and refiners looking to transport crude as well as store supplies on tankers to take advantage of the widening contango.

--With assistance from Jack Wittels and Jeffrey Bair.

To contact the reporters on this story: Serene Cheong in Singapore at scheong20@bloomberg.net;Dan Murtaugh in Singapore at dmurtaugh@bloomberg.net;Alex Longley in London at alongley@bloomberg.net

To contact the editors responsible for this story: Serene Cheong at scheong20@bloomberg.net, Christopher Sell, John Deane

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