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<\/a><\/p>\nThe tightness of the market is demonstrated by a price structure in oil futures called backwardation — where prices for near-term delivery rise above contracts for later months. This pattern is currently prevalent in crude, diesel, natural gas and coal.<\/p>\n
\u201cThe situation we have today, where all markets are very backward, tells you there\u2019s not much give in the system,\u201d Hardy said. Energy supplies are only arriving \u201cjust in time at the moment, which is not a great place to be.\u201d<\/p>\n
Patchy recovery<\/strong><\/p>\n The recovery in fuel demand is still uneven. In oil products, Vitol sees gasoline consumption in the US down by around 400,000 barrels a day currently, compared with February 2019.<\/p>\n \u201cWe still think it\u2019s being affected by work from home,\u201d Hardy said. \u201cPeople are not driving to the station, they\u2019re not driving to work.\u201d High prices may also be encouraging drivers to use their cars less, he said.<\/p>\n Instead, diesel-powered industrial transportation is fueling demand growth, but jet fuel consumption remains capped by a lack of long-haul flights.<\/p>\n Oil supply is growing, just not as fast as consumers need, Hardy said.<\/p>\n US shale is increasing, but not at the same level it did during the boom years. Capital constraints from drillers and a lack of crew are also holding back production, Hardy said.<\/p>\n OPEC+ is gradually boosting output, and a nuclear deal with the U.S. could allow Iran to pump an extra 1 million barrels a day, but that supply is already factored in for the second half of the year, Hardy said.<\/p>\n \u201cEventually we\u2019re going to run out of spare capacity,\u201d he said. \u201cThat\u2019s what the market is trying to work out — how worried to be about that scenario.\u201d<\/p>\n
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