While oil was swept up in a broader market sell-off on Friday, futures in New York after still up 20 percent this month and global benchmark Brent has rallied for its best ever start to a year. As producers prepare to gather and discuss the state of the market, early signs point to differing views on strategy with Saudi Arabia in favor of keeping supply steady and Russia angling for an increase.
The market is also facing an escalation in Middle East tension after the US carried out airstrikes in eastern Syria on sites connected to Iran-backed groups. A pocket of Chinese demand may slow, however, after its oil storage neared capacity following a buying spree of cheap crude last year.
OPEC+ will meet amid an atmosphere of buoyant optimism in the outlook, with traders and investment banks this week making a series of bullish calls and upward price revisions. The recent big freeze that halted millions of barrels of US output exacerbated the market tightening and scarce supply is set to deepen in the coming months as North Sea fields undergo major maintenance.
"The velocity of the demand increase over the next six months could fuel higher prices, up to $70 or $80 a barrel," said Victor Shum, vice president of energy consulting at IHS Markit in Singapore. "World oil supply can’t keep up with rising demand unless Saudi Arabia chooses to increase production."
Exports of five key North Sea crudes -- Brent, Forties, Ekofisk, Oseberg and Troll -- will slump to a five-month low of 780,000 barrels a day in April, according to loading programs compiled by Bloomberg. Bigger declines in shipments may be in store because of work in June on the Forties Pipeline System that will slash output sharply.
US drillers reported almost 6 million barrels of combined production losses during the cold blast last week, while Vitol Group says the market is pricing in a strong global short-term deficit as stockpile declines continue at a rate of 2 million barrels a day to 3 million barrels a day.