Oil Market Braces for Contango and Shale Slowdown

Group 1: Oil Market Outlook - The entire 2026 WTI futures curve is trading below $60 per barrel, which is below breakeven levels for most new shale wells, raising concerns about a potential contango situation [1][5] - TotalEnergies CEO and Vitol's CEO warn that such low prices could lead to a reduction in U.S. shale output by 200,000 to 300,000 barrels per day next year, tightening supply as demand stabilizes [1] - Backwardation, previously a feature of the market, is now only extending until February 2026, indicating a shift in market dynamics [5] Group 2: Market Movements - US LNG developer Venture Global reached an arbitration settlement with China's Unipec, avoiding litigation over cargo delivery failures [3] - Strathcona Resources has abandoned its hostile takeover bid for MEG Energy, potentially facilitating a merger between MEG and Cenovus [3] - Chevron is nearing an exploration deal with the Greek government for deepwater blocks south of Crete, with surveying set to begin in 2026 [4] Group 3: Price Trends and Sentiment - The current market sentiment is negative, with hedge fund net length in WTI futures and options at 29,410 contracts, which is 15% of the level at the beginning of the year [5] - Resurgent US-China trade tensions and the reimposition of tariffs are negatively impacting oil sentiment, with ICE Brent prices at $62 per barrel seen as temporary before a potential decline [6]