Oil prices are falling and analysts and market players are as eager as ever to explain the decline in accordance with their own bullish or bearish leanings. It’s a natural correction that was only to be expected after the buildup of long bets on crude oil and oil product futures, the bulls insist. It’s the start of a trend, thanks to the major jump in U.S. production, the bears counter. Now, data from physical oil markets has surfaced that supports the bears’ stance.

North Sea Forties, Russian Urals, WTI, and Atlantic diesel have all fallen to their lowest in several months, Reuters reports, citing commodity traders and analysts. These are physical markets — the markets where actual oil is taken from one place and shipped to another to be refined into fuel and other products, as opposed to the speculative futures market. If the physical market points down, chances are the price drop — 15 percent in three weeks — is not just a blip, as OPEC’s Secretary General Mohammed Barkindo said earlier this week.

Interestingly enough, Barkindo also said he had Russian President Vladimir Putin’s word that Russia will not flood the market with oil while the cut deal still holds. The reason this statement is interesting is that it is the latest example of OPEC’s tendency towards upbeat comments that have little substance, unlike the physical oil market data.

RBC Capital Markets’ Michael Tran told Reuters that, “Physical markets do not lie. If regional areas of oversupply cannot find pockets of demand, prices will decline. Atlantic Basin crudes are the barometer for the health of the global oil market since the region is the first to reflect looser fundamentals. Struggling North Sea physical crudes like Brent, Forties, and Ekofisk suggest that barrels are having difficulty finding buyers.”

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This is bad news and it comes amid increasingly bearish production projections from the Energy Information Administration and a warning from the International Energy Agency that another oversupply is not out of the question this year. The global oil market could slip into deeper oversupply on the back of non-OPEC production growth led by the United States, the authority said in its latest Oil Market Report.

“The main factor is U.S. oil production,” the IEA said. “In just three months to November, crude output increased by a colossal 846 kb/d, and will soon overtake that of Saudi Arabia. By the end of this year, it might also overtake Russia to become the global leader.”

The Energy Information Administration has reported two consecutive weekly crude oil inventory builds after more than two months of declines. Oil production grew from 9.49 million bpd for the week to January 5 to 10.25 million bpd in the week to February 2. The United States is experiencing a second shale revolution that could put the first one to shame thanks to the previous oil price collapse that motivated stricter financial discipline and a focus on efficiency improvements.

The U.S. is already producing the same as or even more than Saudi Arabia. The upbeat global economy projections of various authorities are still only that, projections, and the market is treating them with caution as everyone watches the U.S. shale patch.

This caution adds to the fact that supply may not be matching demand: Forties’ differentials to dated Brent have fallen to a negative $0.70 from a premium of $0.75 at the start of 2018. Urals trades at a discount of $2.15 to dated Brent in the Mediterranean, the lowest since September 2016. To top it all, demand for key fuels such as diesel and heating oil is unusually weak. The physical market’s needle is pointing to bear, for now.

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