Oil Drops and Shows Contango as Demand Concerns Rise
Source: Marketscope 2.0
Oil prices are under pressure. FCXM's CFD for Brent, UKOil, and its CFD for WTI, USOil, have charted a lower peak (LP) followed by a lower trough (LT) on their respective weekly charts. This puts both instruments into a defined downtrend on a significant time scale. The market is worried about demand, and this has contributed to the weakness.
This morning, UKOil was trading around $78.50 per barrel, down from its September high of $97,66 per barrel and USOil was trading near $73.85 per barrel, down from its September high of $95.018 per barrel. These are the lowest levels seen since early July and are in line with a decline in total capacity utilisation (TCU), which is a measure of demand.
Source: wwww.tradingview.com
TCU printed at 78.9% yesterday, that was lower than the 79.4% anticipated and below July's 79.59%. UKOil has a 69% correlation coefficient with TCU and USOil's at 64%. This suggests that if demand shows further signs of slipping, there will be a potential headwind acting against oil prices.
The oil market is now in contango, i.e., spot prices and near-term futures are valued less than futures expiring further out. This indicates a well-supplied market.
Russell Shor
Senior Market Strategist
Russell Shor is a Senior Market Strategist at FXCM, having been promoted to the role in 2025 in recognition of his depth of insight and consistent delivery of high-impact market analysis. He originally joined FXCM in October 2017 as a Senior Market Specialist.
Russell holds an Honours Degree in Economics from the University of South Africa, is a certified FMVA®, and a full member of the Society of Technical Analysts (UK). With over 20 years of experience in financial markets, his work is renowned for its clarity, precision, and strategic value across asset classes.
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