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Oil prices rebound following OPEC+ reassurance, but set for weekly decline 

June 7, 2024

Key points: 

  • Brent crude futures rise to $79.89 per barrel; WTI crude futures reach $75.59. 
  • Oil prices supported by reassurance from Saudi Arabia and Russia about potential adjustments to supply agreements. 
  • Prices set for the third consecutive week of declines due to concerns over rising supply. 

This article is a follow-up to: Oil prices hovering at lows with rising supply 

Supply chain disruption in the WTI oil sector 

Oil prices ticked higher on Friday, supported by reassurance from key OPEC+ members Saudi Arabia and Russia about their readiness to adjust output agreements. However, despite these gains, markets are heading towards their third straight week of losses. Brent crude oil (Symbol: UKOUSD) to $79.89 per barrel, while WTI crude oil (Symbol: USOUSD) climbed 4 cents to $75.59. 

Chart showing UKOUSD (Brent crude oil) trading activity with moving averages (5, 10, 20, 30) and MACD indicator. Oil prices have rebounded to $80.018 per barrel, supported by reassurance from OPEC+ members about their readiness to adjust output agreements. Despite these gains, the market is set for its third straight week of losses. The article discusses oil price movements and the impact of OPEC+ statements on market sentiment.
Chart showing USOUSD (WTI crude oil) trading activity with moving averages (5, 10, 20, 30) and MACD indicator. Oil prices have rebounded to $75.666 per barrel, supported by reassurance from OPEC+ members about their readiness to adjust output agreements. Despite these gains, the market is set for its third straight week of losses. The article discusses oil price movements and the impact of OPEC+ statements on market sentiment

The images above show the slight uptick in oil prices, as observed on the VT Markets app

Oil prices are likely to hover around the $76-$80 range as sentiments stabilize and markets await further cues. 

Rebalancing oil supply to bring back a price recalibration 

The recent price rally was driven by comments from Saudi Arabia and Russia aimed at reassuring markets about their supply agreements. Saudi Energy Minister Prince Abdulaziz bin Salman emphasized that OPEC+ could pause or reverse voluntary output increases if market conditions necessitate such actions. Russian Deputy Prime Minister Alexander Novak also highlighted the readiness of the alliance to react quickly to market uncertainties, attributing the recent price drop to misinterpretation and speculative factors. 

Despite these reassurance, oil prices are set for a third consecutive week of declines. The latest OPEC+ meeting minutes were interpreted to have an increase in supply, which is bearish for prices. The group agreed to extend most production cuts into 2025 but left room for gradual unwinding of voluntary cuts from eight member countries. 

Broader economic factors affecting oil prices 

The recent interest rate cut by the European Central Bank has prompted expectations that the US Federal Reserve might follow suit. Lower interest rates generally boost oil demand by reducing borrowing costs and stimulating economic activity. Additionally, US non-farm payrolls data for May, due later on Friday, could provide more insight into the timing of potential Fed rate cuts this year. 

In China, official customs data showed that the country imported 46.97 million metric tons of crude oil in May. This robust demand from China provides some support to global oil prices amid the supply and demand dynamics. 

Opportunities and risks in the energy sector 

Oil prices are likely to remain within the $76-$80 range as markets digest OPEC+ reassurance and monitor upcoming economic data, particularly from the US and China. Potential Fed rate cuts and Chinese demand will be key factors to watch in oil trading. Continued market management by OPEC+ and adjustments to supply will be crucial in stabilizing prices. 

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