Given all the uncertainty around US policies on sanctions and tariffs, there isn't much appetite in the market for production cuts to start unwinding in April. I am leaning towards predicting a delay, possibly by a month or two, which was always a possibility since we're still in the seasonal refining turnaround period.
Outlook for demand and supply balances this year?
We expect to see a supply surplus this year as non-OPEC supply exceeds demand growth. However, there are risks, notably from underperformance in countries like Brazil and Mexico. Brazil, expected to significantly contribute to the supply, has been disappointing with maintenance delays and slow platform launches. Mexican production is also declining. More US production is unlikely given geological challenges and the need for higher oil prices to justify drilling. There’s also a geology problem, with the best reservoirs being depleted. If prices drop by $15 to $20, as some anticipate, it will lead to a decline in US production.
Europe's direction on taking on more Russian energy if a peace deal is reached?
Even with a potential peace deal between Russia and Ukraine, which would take time to finalize, I don't see Europe quickly lifting those embargoes. Also, from Russia's perspective, they have built strong relationships with new buyers like China and India. Given that any future demand growth is likely to come from these regions, rather than Europe, it makes strategic sense for Russia to continue cultivating these relationships. Long-term contracts, especially with India, further solidify this strategy.