OPEC likely to bring more supply given the Dubai market structure

Supplies issues continue to creep up in OPEC nations, as the Libyan output continues to be impacted by multiple political and technical hurdles. Libyan exports were expected to remain below 700 kb/d for the next weeks, which almost halved compared to Q4 exports. Global crude inventories continued to dip by about 10 mb since Christmas, throughout the winter break, according to satellite data providers, which pushed prices higher, lifted by strengthening backwardation. ICE Brent March contract is now trading above 78 $/b. Looking at European refining margins, they remained supported by the crash in European natural gas prices, as diesel cracks climbed above 12 $/b throughout the last week of 2021. 2022 forward margins are likely too low given natural gas costs to be fully transmitted to consumers, which will continue to pressure European refining runs in Q1 22. OPEC+ meets tomorrow to decide on a production path for February onwards. Given how Dubai’s backwardation remained supported over the last month, at a constant 50 cents at the prompt, it is likely that the group will continue with its monthly production increases.