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(Bloomberg) — Oil slipped for a third day on nascent signs of a softening physical market, as traders assess the likelihood of a glut in the second half of the year.
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West Texas Intermediate futures fell by as much as 1.7% to trade near $68 a barrel after a weekly report from the US Energy Information Administration showed inventories at the key storage hub in Cushing, Oklahoma, rose to the highest since June, while US distillate demand ticked down. At the same time, crude inventories fell by 3.86 million barrels.
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Traders and analysts remain preoccupied with the prospect of an oversupply later this year, as global demand growth cools, the OPEC+ alliance fast—tracks the return of halted supplies and output across the Americas booms. Price gauges indicate that availability is tight for the time being, with a premium of $1.06 cents on the US benchmark’s prompt spread, and US distillate inventories, which include diesel, sitting at the lowest level since 1996 seasonally.
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Oil has ticked higher this month — building on the upward trend since May — despite concerns that US President Donald Trump’s tariff onslaught will hurt demand and that plans by OPEC+ to rapidly continue reviving supplies may result in a glut. Earlier this week, Goldman Sachs Group Inc. raised its Brent forecast for this half, although it remained cautious about 2026.
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While global crude inventories have been swelling in recent months, the bulk of the accumulation has come in markets that have relatively little impact on futures prices, according to Morgan Stanley. The premiums traders are paying for more immediate supplies, a pattern known as backwardation, signal strong short-term demand.
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“The Brent futures curve remains firmly in backwardation across the first four-to-six months — a structure that usually points to market tightness,” Morgan Stanley analysts including Martijn Rats said in a note, which highlighted what they described as an uneven distribution of inventory increases. “The builds have been in the Pacific, but Brent is priced in the Atlantic,” they said.
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—With assistance from Yongchang Chin and Catherine Cartier.
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