The OPEC+ production cut surprised the market and led to an 8% increase in oil prices, sparking optimism in the markets. Although this decision may seem very optimistic for the oil markets at first glance, the real reasons for the cuts are actually the most pessimistic. They are revealed by energy expert Osama Rizvi in an article for the OilPrice resource.
Those who are skeptical of the demand recovery scenario point out that China (the main benchmark) has already rebuilt its stocks when prices were low, and the clouds of an impending recession, or at least severe global economic downturn, seem to be gathering on the horizon . . Recent OPEC+ cuts suggest demand skeptics are right. It’s just that manufacturers sense global trends much earlier and better than marketers in the lobby.
Moreover, the data from Vortexa also confirms the growing bearish mood in the oil markets, which means that the situation is in decline. For example, total offshore oil shipments were strong, with loading volumes well above their seven-year range, reaching 50 million barrels per day in March, up 400,000 barrels per day from February. Demand for petroleum products also hit a multi-year high in March – 46 million barrels per day.
As the expert writes, it should be taken into account that the export of Russian crude oil also remained stable, despite the sanctions. Despite Moscow’s claims of a 500,000 bpd production cut, Russian crude oil loading remained flat month-on-month at 3.6 million bpd. There was also a significant increase in Russian diesel exports, up 400,000 barrels per day from the previous month to an exceptionally high 1.5 million barrels per day.
In other words, against the backdrop of an overheated market, hype and general confusion, the industry markets were very wrong in their assessment of OPEC+ shares. The Alliance wanted to adjust supply to actual demand, and not affect quotes, because traders immediately thought of that. In the end, the actions of traders in short deals led to the opposite effect, which representatives of the oil bloc wanted to get rid of.
