Meanwhile, IHS reports a swift unwinding of storage contracts: File Image/PixaBay
Even though the oil market continued to generate good news on Tuesday and the Organization of the Petroleum Exporting Countries (OPEC) said market outlook is positive, prices fell to two week lows due to worries over the likeilihood of OPEC soon easing its supply curbs.
Brent fell 99 cents, or 1.6 percent, to settle at $62.70 per barrel, its lowest close since Feb. 12; the global benchmark has fallen about 7 percent from a 13-month peak reached last week.
West Texas Intermediate fell 89 cents, or 1.5 percent, to $59.75, its lowest close since Feb. 19; it has dropped about 6 percent since Feb. 25, when it closed at its highest since May 2019.
Diamantino Azevedo, president, OPEC
We see a certain balance between demand and supply
But an upbeat Bjornar Tonhaugen, head of oil markets at Rystad Energy, remarked, “The oil market has finally reached a stage that hints recovery, as it is the first time in a year that everyone expects OPEC+ to justifiably bring more output back to production mode.”
For its part, OPEC believes the market can accommodate an estimated 1.5 million barrel increase of product: Diamantino Azevedo, the cartel's president, told media on Tuesday that “Crude prices are relatively stable ... we see a certain balance between demand and supply.”
On a Twitter message Tuesday, Mohammad Barkindo, the cartel's secretary general, added that positive global economic developments and resilient demand in Asia were encouraging.
This is the stance taken by Russia, which wants to push ahead with a supply increase even though OPEC member Saudi Arabia has publicly encouraged partners to be "extremely cautious" on production policy.
Indeed, rising prices and optimism about demand thanks to the efficacy of the Covid vaccines is spurring a swift unwinding of storage contracts: IHS Markit reported that at the end of February, the volume of refined products held on stationary tankers for over 10 days stood at 19.2 million barrels, down 77 percent from a peak of 84 million last May.