Oil rose slightly as traders still anticipate the Organisation of the Petroleum Exporting Countries (OPEC+) market outlook. The cartel is still imposing supply curbs to support prices, and with indications that the physical crude market is tightening, Bloomberg reported.
Brent crude was trading above $82 a barrel, advancing for the sixth time in the previous seven sessions. Meanwhile, West Texas Intermediate was close to $77 a barrel. As near-term barrels trade at a premium to longer-dated ones, pricing patterns such as Brent’s prompt spread, or the difference between its two nearest contracts, are moving further into backwardation, indicating a tighter supply.
According to ship-by-ship tracking, a portion of the enormous fleet of tankers that Russia uses to transport its crude is coming to a grinding halt as a result of US sanctions. That’s another indication that, amid the Ukrainian conflict, stricter regulations by Western regulators may be beginning to have a noticeable impact on Moscow.
Oil has increased by more than 6 per cent so far this year, but it hasn’t broken through decisively. Ample output from outside the group and an uncertain demand outlook have largely offset the impact of OPEC+ cutbacks, as well as anxiety over Middle Eastern conflict, including attacks on shipping in the Red Sea.
OPEC+ monthly report will provide insight into anticipated global balances for the upcoming quarters. Morgan Stanley increased its targets for oil prices recently, citing OPEC+ better-than-expected compliance with supply cuts as one of the reasons.
Early in the upcoming month, the larger OPEC+ alliance will determine whether to continue their cuts into the second quarter. Prior to that, Iraq stated that its supply now complies with the previous agreement made by the group, and the United Arab Emirates stated that it is dedicated to cooperating with the alliance to maintain market stability.
According to Warren Patterson, head of commodities strategy for ING Groep NV in Singapore, What the market is looking for is “what OPEC+ decide to do with their voluntary supply cuts, which expire at the end of March,”
“Our balance sheet suggests that the market will be in surplus in the second quarter of 2024 if the group fails to roll over part of these cuts.” He added.
The International Energy Agency will provide its analysis on Thursday, following OPEC+ outlook. Due to the Lunar New Year holidays, many Asian markets will likely have low trading volumes on Tuesday.
