Is the Brent crude oil trend about to reverse? The rare "smile curve" reveals a significant divergence in oil prices

Futures Curve Anomaly Indicates Turning Point

Recently, a rare phenomenon has emerged in the oil market: the futures contract pricing for Brent crude oil has taken on an unusual shape. According to Morgan Stanley’s analysis, the prices of contracts for the first nine months are trending downward, then begin to rise, forming an overall “smile curve.” Analysts like Martijn Rats and Charlotte Firkins point out that in nearly 30 years of historical records, such a pricing pattern has rarely been seen, indicating that the market is digesting a complex and contradictory signal.

Oversupply Expectations Drive Short-Term Decline

This abnormal futures curve structure conceals a dual market expectation. Currently, Brent crude oil’s near-month contracts remain above the longer-term contracts, forming an “inverted spread” pattern, with traders paying a premium for spot oil, reflecting recent supply tightness. However, after 2026, the curve will invert to a “positive spread,” signaling the arrival of an oversupply era.

Morgan Stanley forecasts that Brent crude oil prices will later this year fall to a low of $60 per barrel. This prediction is based on multiple factors: the ongoing US-led trade war exerting pressure on energy demand, OPEC+ increasing production at an unexpectedly rapid pace, and rising market concerns over future oversupply. Brent crude oil prices have already fallen 12% this month, reflecting the accumulating influence of these factors.

Supply Dynamics Reshape Long-Term Patterns

According to Barclays’ assessment, the global oil market will experience a daily oversupply of 1 million barrels in 2025, expanding to 1.5 million barrels per day in 2026. Based on this judgment, Barclays has lowered its average price forecast for Brent crude oil in 2025 to $70 per barrel, and further down to $62 in 2026.

Analysts further note that oil supply may still be in deficit in the third quarter, but the situation will rapidly reverse afterward. Trade tariffs will become a major factor suppressing oil demand, and the combination of slowing demand with strong supply growth will ultimately shift the market from tightness to looseness.

Market Status and Outlook

As of April 29, Brent crude oil was trading at $64 per barrel. This level lies between recent highs and forecast lows, reflecting the market’s ongoing digestion of differing supply and demand expectations over various timeframes. The oil price trend is no longer a simple unidirectional fluctuation but shows a clear structural divergence—short-term pressure and a gradual decline in the medium to long term.