Column: OPEC+ keeping output cuts won't surprise the physical crude market | Reuters
The decision by OPEC and its allies to extend crude oil output cuts into April came as something of a surprise to a market expecting some level of increase, but it shouldn’t have.
The problem for the prevailing narrative is that it’s focused on what is happening in the paper crude market, the widely followed and traded Brent and West Texas Intermediate futures.
They have been signalling increasing tightness in the global oil market as the world starts to recover from the economic impact of the coronavirus pandemic, coupled with the ongoing supply restrictions imposed by the producer group, referred to as OPEC+.
The paper market has a point: oil demand does look like it will be heading higher, but the problem is a matter of timing.
The market is priced for a sharp increase in demand right now, and in the next few months.
But the physical crude market is telling another story, with traders there saying there are plenty of cargoes available, especially for delivery to the top-importing region of Asia.
The physical market has largely already sorted out what they are buying for April, and they are now looking more at loading programmes for May and June.
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