If there is something bullish traders love, that is stock draws and deficits, and today there is strong news on both to trade on.

Oil prices are supported by projections of another draw in US crude and gasoline inventories, a lasting indication that demand and supply are on the right track under the current balance relationship.

Oil stock draws are crucial to forming the market price, especially as 2020 added a lot of fat in storages that needs to be cut going forward. Indications that storages are on a ‘diet mode’ help prices rise.

The expected draws left traders with a sense of optimism that demand may already be recovering in the US, where nearly 34 million vaccine doses have been given already.

Key in maintaining the current prices levels will be the official storage numbers by the EIA later today.

Sentiment is also boosted by a physical buying spree of North Sea cargoes by top dog crude trader Shell, which leaves other traders guessing why one key trader is so bullish.

The answer may lay in the availability of global supplies. We expect several months of crude and condensate supply deficits going forward so it will be a tight market to trade on.

Separately, in the US Democrats seem now to increasingly push to approve their pandemic aid package without bipartisan support. Injecting funds in the market will help oil demand and traders see that coming closer and closer.

Quite important on shaping today’s prices was yesterday’s OPEC+ JTC meeting.

The committee’s assessment showed that the members expect deficits during 2021, which will bring stocks to more normal levels, brushing away the fat gained during the pandemic’s first year.

The supply-demand imbalance is strong enough to move markets and prices are benefiting today from these OPEC+ projections.

Else, we do not expect, nor does the market, that the 3 February OPEC+ JMMC meeting today will be the venue for any conclusive clues on what OPEC+ tapering will look like beyond April.

That decision is expected to be subject to a heated debate at the 3-4 March JMMC and OPEC+ meetings.

Nevertheless, a surprise announcement today cannot be ruled out completely, but most likely this JMMC will only produce the usual status assessment of fundamentals and a reaffirmation of the current policy and call for vigilance, continuing to tie-up the supply uncertainty for the second quarter.

The Saudi gift aside, the last OPEC+ policy set in December 2020 outlined a path for the 23-nation block to gradually increase production by 500,000 bpd on a monthly basis.

The aim was to hold back 7.2 million bpd in January, which according to our estimates, was followed closely.

We estimate that the OPEC+ quota-countries’ crude production (excluding Mexico, Libya, Iran and Venezuela) rose by about 430,000 bpd m/m in January, and for the group as a whole by about 350,000 bpd m/m.

The group faces the same supply-balance dilemma as last month, only with a few more data points: How much production to allow, how to ensure compliance, and how to hit the “sweet spot” where oil prices neither collapse nor spike, to avoid firing up US shale activity too much.

Maybe, just maybe, today will provide additional clues on what to expect for April and beyond, if group cohesion is strengthening, or if fatigue has started to fester.