Spreads starting to reflect a more balanced market

Crude prices continued to spiral downwards, as the omicron variant continued to dent future expect demand. Front-month ICE Brent remains above 71 $/b, while time spreads corrected heavily over the last few days. Indeed, the Feb/March 22 spreads are now trading at 32 cents, from 110 cents prior to the month, reflecting the slowdown in stock draws. Crude differentials have also experienced some downside, especially for middle eastern crude benchmarks such as Oman, which reflect a lack of Asian prompt demand addressed to OPEC’s main producers. 

OPEC members will meet on Thursday according to the latest reporting. Members will have to factor in the potential for demand destruction that the vaccine-resistant Omicron variant brings to the table.