Oil Market Outlook
Oil prices rose on speculation that Opec+ might cut output further to support prices, following a warning issued by the Saudi energy minister to short-sellers. The market was also supported by a large and unexpected decline in US crude inventories.
However, prices were pressured by the resumption of some supply from Canada as well as pessimism about US debt-ceiling negotiations.
West Texas Intermediate (WTI) crude rose $1.12 to close at $72.67 per barrel. Brent gained $1.37 to $76.95 and Dubai crude averaged $75.19. Thaioil forecasts that WTI this week will trade between $70 and $78, and Brent between $73 and $82. Prices are expected to remain volatile until the US debt talks are resolved, while the market is also seeking clarity about production from Opec and its allies. Among the factors expected to influence trade:
President Joe Biden said a deal to raise the US debt ceiling was “very close” heading into the weekend, and Treasury officials offered more breathing room by saying that there was enough money to meet obligations until June 5, not June 1 as believed earlier.
The Opec+ meeting on June 4 will be watched for signs that the alliance might expand output cuts beyond the 1.6 million bpd agreed earlier. Russian Deputy PM Alexander Novak said no change was likely, but Saudi Energy Minister Prince Abdulaziz bin Salman warned speculators they should “watch out”. The latter comment suggested another cut might be considered.
US crude inventories are expected to keep declining as refinery activity surges with the start of the driving season on the Memorial Day holiday weekend. Inventories in the week to May 19 fell 12.5 million barrels, compared with forecasts for an increase of 800,000 barrels, due mainly to lower net crude oil imports.
Turkey’s runoff election has been compounding delays to restart roughly 450,000 bpd of shipments of crude from the Kurdistan Autonomous Region of Iraq to the Ceyhan port in Turkey, as Ankara reviews its relationship with Baghdad, analysts say. The delay comes despite the Iraqi government and Kurdish officials having resolved their differences over revenue sharing and other issues.
The wildfire crisis in the Canadian oil-producing province of Alberta is subsiding following lower temperatures and rainfall. The relief allows some crude oil and natural gas producers to resume operating after a supply loss of 319,000 bpd, or 3.7% of national capacity.
Economic indicators to watch include Chinese and US manufacturing and services PMI for May and US non farm payrolls in May.