Last month, OPEC and its non-OPEC allies, known as OPEC+, agreed to extend their deep production cuts through July in an effort to rebalance oversupplied markets in the face of pandemic-hit demand. The cuts were supposed to take ~10% off the markets with July’s cut clocking in at 9.6 million bpd.

But now there are signs that the pendulum could have swung a bit too far, with the markets beginning to experience shortages of key crude grades.

There are growing signs that the markets are undersupplied with Urals and Arab Light thanks to continuing deep production cuts as well as a rebound in demand by key customers such as China and Northern Asia.

The price of Urals, Russia’s flagship grade, has flipped to record premiums to the Brent crude benchmark, briefly changing hands at $2.40 a barrel above Dated Brent last week to reflect the undersupply.

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Source: Oil Price