Oil prices have surged as the physical crude market tightens, and traders eagerly await OPEC’s outlook amid ongoing supply curbs. Brent, trading above $82 a barrel, has gained ground for the sixth time in seven sessions, with pricing patterns indicating a tightening market. The US sanctions on Russia’s tanker fleet are exacerbating the situation, hinting at the tangible effects of Western regulatory measures on Moscow amid the Ukraine conflict.
While oil has gained over 6% this year, the impact of OPEC cuts and concerns over Middle East conflicts have been counteracted by ample output from non-OPEC sources and uncertain demand projections. The upcoming OPEC monthly report is anticipated to provide insights into global balances in the coming quarters, with Morgan Stanley raising oil price targets due to OPEC’s better-than-expected compliance.
The broader OPEC+ alliance is set to decide on extending cuts into the second quarter, and Iraq and the UAE have expressed commitment to market stability. Market observers are keenly interested in OPEC+’s decision on voluntary supply cuts expiring in March. Warren Patterson, head of commodities strategy for ING Groep NV, warns of a potential second-quarter surplus if these cuts are not extended.
Following OPEC’s outlook, the International Energy Agency’s release on Thursday will provide additional insights. Asia’s trading volumes are expected to be thin on Tuesday due to the Lunar New Year holidays.