The overall supply-demand backdrop is looking better for OPEC+, with the cartel cutting estimates for a surplus in the first quarter amid slower output growth from its rivals. Recent weeks have seen a litany of supply issues in producing countries, including in OPEC member Libya, where production is expected to fall again this week.
Oil’s market structure remains in a bullish backwardation pattern, which indicates continued tightness of supply. Speculators have also been returning, with money managers last week boosting bullish bets on Brent by the most since July.
“I don’t expect much surprise” from OPEC+, said Hans van Cleef, senior energy economist at ABN Amro. “The biggest challenge is starting to be to actually implement the theoretical rise in production as more and more producers start to struggle.”
The OPEC+ Joint Technical Committee, which analyzes the market on behalf of ministers, sees a surplus of 1.4 million barrels a day in the first three months of 2022, about 25% less than it estimated a month ago, according to a report seen by Bloomberg.
Meanwhile, China could maintain border restrictions for the rest of this year as it prepares to host the Beijing Winter Olympics and a series of political events, according to Goldman Sachs Group Inc. The country is one of the few nations still committed to a “Covid Zero” approach, potentially hurting demand.
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