On Tuesday, official data indicated that Russia's average oil production in December was around 130.6 million tons per day, equivalent to 957,000 barrels per day. This reduction, approximately 600,000 barrels per day from the previous month, marked the largest single-month cut since the initiation of production cuts, being about 375,000 barrels per day lower than the baseline set in early February 2023.
Under the OPEC+ agreement, Russia had committed to intensifying its voluntary oil export cuts during the first quarter of 2024. These cuts are expected to reach 500,000 barrels per day, including a 300,000 barrels per day reduction in crude oil exports and a 200,000 barrels per day reduction in fuel exports.
On the same day, the U.S. Energy Information Administration (EIA) released its short-term energy outlook report. According to the EIA's latest forecast, due to market tightening caused by OPEC+ production cuts, global oil demand will exceed supply by about 120,000 barrels per day this year. The EIA also raised its growth forecast for the U.S. GDP to 1.6% for the year, significantly higher than the 1.3% projected in December. However, global demand is expected to slow in the second half of the year, leading to an inventory increase by 2025.
On the supply side, the EIA revised its projection for U.S. oil production upwards, from 13.11 million barrels per day last month to 13.21 million barrels per day, with further growth expected next year to over 13.40 million barrels per day. This growth, driven by increased efficiency, comes despite a reduction in active drilling rigs.
The EIA forecasts Brent crude oil prices to average around $82 per barrel this year, similar to last year's prices, and could even reach $85 per barrel in March, higher than the current price. However, the price could drop to around $79 per barrel in 2025, as production growth is expected to slightly outpace demand growth.
The EIA report also highlighted the increased risk of supply disruptions due to recent tensions in the Middle East, which could lead to higher and more volatile actual prices than predicted.
From the options market perspective, some investors are betting on further escalations in the Middle East tensions. Data from brokers and exchanges show significant recent trades in bullish options strategies for Brent crude oil for May and June, including the purchase of call spread contracts at $110/$130. These contracts profit if oil prices reach or exceed $110, suggesting investors anticipate a significant rise from the current level of around $77 per barrel.
The futures market also reflects bullish sentiments. For the first time since November, the key barometer of the oil market supply and demand-the spot price spread-briefly shifted to a contango, indicating a market view of strong immediate demand and supply shortage or tightness.
On Tuesday, WTI February crude oil futures rose $1.47, up nearly 2.08%, closing at $72.24 per barrel. Brent March crude oil futures increased by $1.47, up 1.93%, closing at $77.59 per barrel.
