Tightening physical oil markets in Europe and Africa, along with disruptions in Red Sea shipping and OPEC+ supply cuts, support oil futures prices. Brent crude futures show bullish signs, reaching $4.34 a barrel in backwardation, indicating tight, prompt supply.
Due to Yemen’s Houthi conflict and high refining margins, tanker diversions are increasing crude demand in Europe. Despite predictions of oversupply, US crude also experiences backwardation.
OPEC+ aims for prices above $80 per barrel to balance budgets, with Brent trading near $84, which is up by 9% this year. Several factors contribute to market tightness, including outages in Libya, production cuts in the US because of cold weather, and issues with Russian payments. In March, OPEC+ will decide whether to extend its oil production cuts.
In Europe, Forties crude differentials to Brent reach late November highs. Middle Eastern crude imports declined in Europe due to Red Sea attacks, favouring local alternatives like Angolan crude.
Asian Middle East cash crude differentials remain stable, while US crude experiences tightness in light of Permian production disruptions and increased March loadings to Asia. India’s January oil imports hit record highs due to Red Sea delays and resumed Venezuelan oil imports, reaching 5.24 million barrels per day (bpd). Russian oil imports rebound, but Middle Eastern imports surge, accounting for 54% of India’s intake.
