By: Bloomberg

Based on the provided text, here is a summary of the key points regarding the current oil market:

Emerging Bearish Signals in Key Markets

Oil prices in the Middle East are showing signs of strain, with Abu Dhabi's flagship Murban crude experiencing its widest contango this year. This market structure, where immediate prices are lower than future prices, signals that current supply is outstripping demand. The weakness is also evident in physical markets, where the December-loading Upper Zakum grade was sold at a deepening discount.

OPEC+ Strategy Clashes with Weakening Demand

The mounting surplus concerns are emerging even as the OPEC+ alliance is expected to raise production in November, continuing its strategy to return idled barrels to the market and reclaim market share. This comes as warnings from major banks and the International Energy Agency point to an impending large glut, contributing to a more than 3% price drop in key benchmarks.

Soaring Global Inventories and Shipping Data

Further evidence of a supply overhang comes from tracking global shipments. Data indicates that oil on the water, including floating storage and cargoes in transit, is 170 million barrels higher than the same time last year. This unusual expansion suggests that seaborne markets across multiple regions are "very long on supply," with excess barrels struggling to find buyers.

Weakened Demand from a Key Importer

A significant factor in the softening market is weaker-than-expected demand from China, the world's top crude importer. Chinese refiners are scaling back purchases due to seasonal maintenance and, critically, a lack of government-issued import quotas that are typically allocated around this time. This has removed a key source of demand for excess barrels heading into the fourth quarter.

Increased Competition in Key Asian Markets

OPEC+ is also facing stiffer competition for market share in Asia. Increased flows of oil from other regions, such as the United States, are putting additional pressure on Middle Eastern crude prices. This competition has contributed to an overhang of unsold cargoes as the current trading cycle concludes.

Mixed Signals Amid Overall Weakness

Despite the overwhelmingly bearish short-term signals, there are still pockets of relative strength. The spreads for second- and third-month contracts for Murban and Oman futures remain in a bullish backwardation structure. However, the collapse in the more liquid front-month prices underscores the market's primary concern over deteriorating supply and demand balances.