LONDON (Reuters) - 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.
(Graphic for Brent Crude Prices: )
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.
(Graphic for Brent Time Spreads: )
OPEC+ has made it clear that it intends to rein in bloated oil inventory levels that the pandemic brought about.
(Graphic for World Oil Demand and Supply: )
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.
(Graphic for OECD Oil Stocks OECD Oil Stocks: )
(Graphic for Oil Market Balance - OPEC+ base case scenario: )
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.
(Graphic for OPEC+ Compliance with Production Cuts (%): )
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.
(Graphic for OPEC Cumulative Overproduction: )
(Graphic for Non-OPEC Cumulative Overproduction: )
(Graphic for Cumulative OPEC+ Overproduction: )
(Graphic for OPEC+ Overproduction Compensation Plans: )
Reporting by Ahmad Ghaddar; Editing by Susan Fenton
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February 05, 2021 at 08:37PM
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Brent near $60 as OPEC+ cuts tighten oil market - Reuters
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