Crude Oil: Geopolitics and an ever-tightening oil market are pushing prices up to fresh multi-year highs. “Brent crude oil is ticking higher by the day as OPEC+ cuts are intact, global oil demand growth is firm…Venezuela oil production is in a death spiral, renewed Iran sanctions are imminent (12 May) and sanctions towards Russia on oil and not just aluminum is possible,” Bjarne Schieldrop, chief commodities analyst at SEB, wrote in a note. “Barring a global recession we think there is more room on the upside and as we stated in early march, if OPEC+ sticks to its cuts we are likely to see $85/bl later in the year as inventories draw lower.” While Friday morning saw a string of bearish news push oil down, this bullish sentiment drove a rebound in prices.
Saudi oil minister Khalid al-Falih said that OPEC will phase out its cuts so as not to shock the market, but that it would be premature to discuss such plans at the June meeting. He also said that the global economy could tolerate higher oil prices and that there wouldn’t be demand destruction. The comments suggest OPEC is set on keeping the limits in place for the rest of this year. Still, OPEC is meeting in Jeddah to take stock of the market, and the data suggests that they have just about eliminated the inventory surplus, which means that keeping the cuts in place could help drive up prices. “The petro-nations seem willing to over-tighten the market, with the current price levels fostering confidence in their supply deal,” Norbert Ruecker, head of macro and commodity research at Julius Baer, wrote in a note. |
