Oil Market Outlook
Oil prices fell last week as political wrangling over the US debt ceiling kept many investors on the sidelines, though a late rally after a deal was reached helped narrow the losses.
Prices were also pressured by an unexpected increase in US crude inventories by 4.5 million barrels, against analysts’ forecast for a drop of 1.4 million.
West Texas Intermediate (WTI) crude fell 93 cents on the week to close at $71.74 per barrel. Brent shed 82 cents to $76.13 and Dubai crude averaged $71.53. Thaioil forecasts that WTI this week will trade between $66 and $74, and Brent between $71 and $80. Prices are expected to remain volatile, with much depending on a weekend meeting of the Opec+ alliance. Among the factors expected to influence trade:
Opec and its allies were meeting over the weekend to review their output cuts totalling 3.66 million bpd, which most including Russia believe are sufficient to support prices. Few analysts were expecting any change, though the Saudi oil minister had cautioned short-selling speculators to “watch out”, leading some to believe Riyadh might push for more production cuts.
Most analysts believe the US Federal Reserve will leave its benchmark interest rate unchanged at the current range of 5% to 5.25% on June 14. The latest CME FedWatch Tool forecast indicates only a 25.4% probability of an increase of 25 basis points. However, a very strong US jobs report on Friday could lead some Fed members to believe that inflation will remain too high unless they raise rates again.
The US averted a debt default with an agreement last week to suspend the debt ceiling. But the negotiations between Democrats and Republicans present new challenges for the government to reduce public expenditure by at least $1 trillion, unnerving investors as the US economy is already at risk of falling into recession.
The energy consultancy FGE forecasts global oil demand will grow by 2.38 million bpd in 2023, 350,000 bpd higher than a previous forecast. Growth is being supported by aviation oil and benzine consumption, expected to rise by 1 million and 640,000 bpd respectively.
Russian crude oil exports are forecast to increase by 500,000 bpd to 5.5 million bpd, says FGE. The figures are in line with a Refinitiv report estimating that Russian exports to China rose to 2 million bpd in May from 1.74 million a month earlier.
Economic indicators to watch this week include Chinese consumer and producer prices for May, and EU retail sales for April.
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