Brent crude oil prices are approaching a one-year high of $ 60, largely driven by OPEC + cuts to support the oil market that has a deficit this year.
Oil demand was devastated due to economies around the world had to shut down for a long time to prevent the spread of the coronavirus.
However, despite renewed lockdowns in Europe and Asia to prevent the second and third waves of the virus, the rising oil market in recent weeks has entered a bull run these days.
Looking at the Brent crude oil time interval, a narrow market picture is seen.
The six-month Brent spread reached around $ 2.4 per barrel, the largest in a year, on Friday. 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.
Looking at the baseline scenario of the group, it is seen that the oil market will have a deficit throughout 2021 and the world’s stocks are expected to fall below the 2016-2020 average in the second half of the year.
Strong compliance with oil cuts agreed by OPEC + also helped support prices. However, some countries that participated in the cuts were not very successful in maintaining the balances.
The cumulative surplus reached 2.69 million barrels per day in December. OPEC + data shows that the increase was largely due to non-OPEC Russia, Kazakhstan and South Sudan, compared to 2.46 million barrels in November.
Global oil stocks have dropped nearly 600 million barrels since May 2020, after rising 1.2 billion barrels in the past five months as a result of epidemics and lockdowns.
Stocks are expected to drop by another 140 million barrels for the remainder of the year, according to estimates from the US Energy Information Administration last month.
Rapidly rising oil prices are signalling the need for more production in the second half of the year to halt the fall in global inventories and satisfy recovering consumption as epidemic-related travel restrictions ease.