The Brent physical oil marketplace is flashing signs of weakness again as dwindling Asian purchases, an influx of American crude to Europe, and renders flowing out of storage all combine to recreate a glut in the North Sea.

The weakness comes at a time when speculators have started rebuilding bullish postures after a sell-off last month, betting the market will stiffen in the second one-quarter. Yet, Brent physical oil merchants say the opposite is happening in so far, according to interviews with executives at several trading houses, who asked not to be identified discussing internal views.

” We need to see the market running really into deficit for oil prices to rise ,” Giovanni Staunovo, commodity analyst at UBS Group AG in Zurich, said.” If this is temporary, it could be weathered, but it needs to be monitored .”

The weakness is particularly visible in so-called time-spreads — the cost difference between contracts for delivery at different periods. Reflecting a growing surplus that could force-out traders to seek tankers as temporary drifting storage facilities, the Brent June-July spread this week fell to an unusually weak minus 55 cents per barrel, down from parity simply two months earlier. The negative structure is known in the industry as contango.

OPEC and several other producers including Russia, Mexico and Kazakhstan agreed in December to reduce production by about 1.8 million barrels a day — the first OPEC and non-OPEC handled in more than a decade — in an effort to counter an oversupply weighing on prices. The producer group gratifies again May 25.

“OPEC will need to take action at the next session in order to offer some kind of oil-price support, ” said Tamas Varga, an analyst at brokerage PVM Oil Associates Ltd. in London.

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