Oil prices in the Middle East are under pressure as concerns of oversupply intensify, with OPEC+ pushing ahead on its production strategy and Chinese demand showing signs of weakness.
On Monday, the prompt spread for Abu Dhabi’s flagship Murban crude slipped into its deepest contango of the year, a bearish market structure where near-term prices trade below later contracts, signaling an expanding supply. Traders also reported that December-loading Upper Zakum barrels were selling at a discount of around 20 cents to the official selling price, double the markdown seen last week.
Brent and West Texas Intermediate futures mirrored the sentiment, falling more than 3% in Monday’s session. The declines come as OPEC+ prepares to raise output in November, despite warnings from the International Energy Agency and Wall Street banks about a growing global surplus.
“There’s a visible overhang in seaborne markets,” said Brian Leisen, global strategist at RBC Capital Markets, as reported by Bloomberg. “Volumes are running 170 million barrels higher than this time last year, and China has not been the ‘catch all’ buyer in Q4.”
While Middle East benchmarks Oman and Murban retain some strength in second and third-month spreads, the weakness in front-month contracts underscores market unease. Chinese refiners, typically a stabilizing force, are curbing runs amid seasonal maintenance and a delay in import quota allocations.
At the same time, Middle Eastern producers are facing rising competition in Asia from U.S. crude exports, which adds further pressure on prices and raises the prospect of cargo overhangs as the current trading cycle comes to a close.
The near-term outlook hinges on whether OPEC+ moderates supply plans or whether Chinese reserve purchases can offset slowing refinery demand. Until then, traders expect volatility to remain elevated, with risks skewed toward further softness in Middle Eastern grades.
