Graphic: Brent Near $60 As OPEC+ Cuts Tighten Oil Market

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posted on 3 years ago — updated on 1 second ago

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Brent crude prices are approaching $60 a barrel, a oneyear high, driven in large part by OPEC+ cuts that are set to keep the oil market in deficit this year.

LONDON: Brent crude prices are approaching $60 a barrel, a one-year high, driven in large part by OPEC+ cuts that are set to keep the oil market in deficit this year.

The coronovirus pandemic ravaged oil demand as economies around the world had to shut down for extended periods of time to curb the spread of the virus.

But the oil market is on a bull run, despite renewed lockdowns in Europe and Asia to curb second and third waves of the virus.

A look at Brent crude time spreads also paints a picture of a tight market.

The six-month Brent spread reached about $2.4 a barrel backwardation on Friday, its widest in a year. Backwardation is when prices on the prompt trade at a premium to future prices, and usually encourages traders to take oil out of storage, signalling a stronger market.

OPEC+ has made it clear that it intends to rein in bloated oil inventory levels that the pandemic brought about.

The group’s base-case scenario shows that the oil market will be in a deficit throughout 2021, with inventories in the industrialised world expected to fall below the 2016-2020 average in the second half of the year.

Strong compliance with agreed oil cuts by OPEC+ have also helped support prices, although some countries participating in the cuts are yet to make good on compensating for their overproduction.

In December, cumulative overproduction hit 2.69 million barrels per day, OPEC+ data shows, compared with 2.46 million bpd in November, with the increase coming largely from higher production from non-OPEC members Russia, Kazakhstan and South Sudan.

Brent Crude Prices https://tmsnrt.rs/39QhbiH

Brent Time Spreads https://tmsnrt.rs/3pTyCV4

World Oil Demand and Supply https://tmsnrt.rs/39DrK8O

OECD Oil Stocks OECD Oil Stocks https://tmsnrt.rs/2MUPNa7

Oil Market Balance – OPEC+ base case scenario https://tmsnrt.rs/3oH4NG7

OPEC+ Compliance with Production Cuts (%) https://tmsnrt.rs/3cD4qKc

OPEC Cumulative Overproduction https://tmsnrt.rs/3joJCri

Non-OPEC Cumulative Overproduction https://tmsnrt.rs/3cCdC1v

Cumulative OPEC+ Overproduction https://tmsnrt.rs/3oLRwMs

OPEC+ Overproduction Compensation Plans https://tmsnrt.rs/3pUKYws

OPEC+ Compliance with Production Cuts (%) https://tmsnrt.rs/3pMTkpC

Cumulative OPEC+ Overproduction https://tmsnrt.rs/2YJaZmf