Oil Prices Climb Ahead of OPEC Reports
Oil prices edged up on Tuesday ahead of the Organisation of Petroleum Exporting Countries (OPEC) monthly production report. In the global market, Brent futures rose 30 cents to $82.30 a barrel. U.S. West Texas Intermediate (WTI) crude gained 31 cents to $77.23 a barrel.
Despite oil prices edging slightly lower yesterday, International Exchange (ICE) Brent remains comfortably above US$80 per barrel. OPEC will release its monthly oil market report, which will include its latest outlook for the market.
Investors expect to see how OPEC views the market ahead of members deciding what to do with output policy for 2Q24. In last month’s report, OPEC estimated that demand for its oil in 2024 would be 28.5m b/d.
This was quite a bit higher than the 26.6m b/d the group is estimated to have produced in January. However, OPEC is estimating that oil demand will grow by 2.25m b/d this year, which does seem fairly aggressive
In a note, ING commodities strategists said, “Our balance sheet suggests that we will be seeing marginal tightening, with the market in a relatively small deficit in 1Q-2024”.
However, what will be of more interest in the coming weeks is what OPEC+ decide to do with their voluntary supply cuts which expire at the end of March.
The prompt ICE gasoil crack is now trading a little over US$33 on the back of tightness due to Red Sea disruptions and some refinery outages.
The European middle distillate market has been plagued by tightness since Russia’s invasion of Ukraine, which has resulted in drastic shifts in energy flows with the EU banning Russian crude oil and refined products.
This has left Europe more dependent on Asia and the Middle East for flows, and these flows are being affected by the Houthi attacks in the Red Sea. Middle distillates are likely to remain well-supported in the short term as refineries go into maintenance season.
Weather in North West Europe is forecast to be milder than usual over the next week or so, whilst storage remains comfortable at 67% full. With the end of the heating season quickly approaching, downward pressure is likely to persist.
Also not helping sentiment will be the weakness seen in the US gas market. Front-month Henry Hub closed almost 4.3% lower yesterday due to forecasts for warmer weather over large parts of the country. Along with weaker gas prices, the market is also seeing less volatility. #Oil Prices Climb Ahead of OPEC Reports#