Pressure on OPEC+

Whether its market prices or threats from oil-consuming countries, OPEC+ is warmly invited to increase production by more than the 0.4 mb/d monthly hike planned for December. Indeed, front-month time spreads in Brent, WTI and Dubai markets all rallied substantially last week, with Dec21/Jan22 WTI at 150 cents, while Jan/Feb 22 Brent hovered around 130 cents. The Dubai benchmark also rallied, albeit at a more modest pace, at about 100 cents for the front-month time spread. This places the Brent-Dubai EFS spread at an ultra-wide 5.38 $/b in favour of light sweet crudes such as Brent. This discount for sour crudes, observed globally, partially explains OPEC’s reluctance to hike production, in a market where sour crudes are already struggling to clear, while light sweet markets are showing clear signs of buying frenzy. OPEC’s oil ministers noted that no refiners were lacking crude at the moment and that increased sour supply would only add to producers’ inland and floating crude storage. There is therefore little hope for OPEC+ to hike supply on Thursday, despite comments from the Biden administration, the Indian and Japanese governments that crude supply was putting unnecessary pressure on the global economy.