The oil futures curve currently exhibits a rare pattern. Can the 2025 oil price trend repeat the "rise first, then suppress" scenario?

The global oil market has recently exhibited an extremely rare abnormal price structure. According to the latest analysis from Morgan Stanley, the Brent crude futures curve displays a unique shape—an almost unprecedented pattern in history—where short-term contract prices decline while long-term contract prices rise, forming a smile-like curve. Analysts Martijn Rats and Charlotte Firkins pointed out in their report that this rare market pricing pattern reflects the complex contradictions in current oil supply and demand: recent crude oil supply remains tight, but long-term expectations are shifting toward significant oversupply.

Divergence in Oil Price Forecasts

Several investment banks have provided specific predictions for oil prices in 2025. Morgan Stanley believes that Brent crude oil prices will bottom out later this year at around $60 per barrel. Barclays has updated its forecast, lowering the target price for Brent crude in 2025 to $70 per barrel, and further down to $62 per barrel in 2026. It also predicts that next year, the market will experience a daily surplus of 1 million barrels, expanding to 1.5 million barrels per day the following year.

As of April 29, the trading price of Brent crude was $64 per barrel, already within the analysts’ predicted downward range.

Key Transition from “Contango” to “Backwardation”

The current Brent crude futures market exhibits a so-called “contango” pattern—where near-month contracts are priced higher than longer-term contracts. This is usually seen by market participants as a bullish signal, indicating that traders are willing to pay a premium for immediate crude oil. However, this structure is not stable. Analysts indicate that after 2026, the futures curve will invert into a “backwardation” pattern, where long-term contracts are priced higher than near-term ones. This shift suggests that oil prices will face sustained downward pressure, as strong supply growth combined with slowing demand will lead to a significant market surplus.

Multiple Factors Driving Oil Price Trends

This month, the oil market is under multiple pressures. Chain reactions from the US-led trade disputes, OPEC+’s unexpectedly increased production decisions, and ongoing market expectations of future oversupply have all contributed to a 12% rapid adjustment in Brent crude prices in April. Analysts point out that trade tariffs will become a major constraint on oil demand. Morgan Stanley forecasts that oil supply may still face shortages in the third quarter, but will quickly shift to a large surplus afterward.

Overall, the smile-shaped pattern of the oil futures curve reflects the market’s complex expectations for oil prices—short-term uncertainties on the supply side remain, but the consensus is that medium- to long-term supply will be oversupplied.