Oil markets ahead of March OPEC+ meeting: Caution may be advisable

Oil markets ahead of March OPEC+ meeting: Caution may be advisable

On the supply side, OPEC+ “” an alliance between OPEC and ten friendly oil-producing nations led by Russia “” fueled the bull market with its historic cuts, which at slightly above 7 million barrels per day (bpd), equating to 7 percent of pre-pandemic global oil production. It was further augmented by the one-time voluntary cut of 1 million bpd for March and April by Saudi Arabia. All of the above led to a negative demand-supply balance and an aggressive drawing down of inventories. In other words, markets are tight. Analysts and traders are warning of a tight market, which pushed prices up, as evidenced by strong backwardation. So, where does this leave oil markets? While things might look positive for the time being, there are still dangers looming. Saudi Arabia's Energy Minister Prince Abdul Aziz bin Salman warned that producers needed to remain vigilant “” and he had a very good point. While the global economic outlook might look good for the time being, there are still uncertainties out there, especially pertaining to fast-spreading new mutations of the COVID-19 virus and the efficacy of existing vaccines against them. On the demand side, Europe seems to be locked in a