(Reuters) – Saudi Arabia’s oil minister has called for a cautious approach to raising production, even as prices surge and many traders anticipate an increasingly severe shortage of petroleum later this year.
“We are in a much better place than we were a year ago, but I must warn, once again, against complacency. The uncertainty is very high, and we have to be extremely cautious,” the minister said in a speech on Wednesday.
In contrast, futures markets point to a rapid tightening of supply, with front-month Brent up more than $25 per barrel or 65% in just over three months since successful vaccine trials were announced in early November.
Brent’s six-month calendar spread has surged into a backwardation of more than $3.70 per barrel, putting it in the 94th percentile for all trading days since 1990, and indicating traders expect a rapid depletion in oil stocks.
The spread was this strong for brief periods during 2019 and in the first few weeks in 2020, flashing expected tightness, but the last time it was this tight on a sustained basis was in 2013.