Recap: The oil market traded mostly sideways and ended slightly higher, up 0.15% on the day,
as the market weighed the builds in crude and product stocks and expectations of slow Federal
Reserve rate cuts against the U.S. economic data showing an easing labor market and slowing
inflation. The market traded lower in overnight trading as it remained pressured following the
EIA’s weekly petroleum stocks report on Wednesday and the bearish IEA report, which warned
of excess supply in the near future. The crude market continued to trend lower and posted a
low of $77.67. However, the market bounced off its low and retraced its earlier losses and
posted a high of $78.89 ahead of the close. The market was supported by hopes that the
Federal Reserve will cut rates in September, reinforced by data from the Labor Department
showing producer prices unexpectedly falling in May. The largest decline in prices at the
factory gate since October following the report on consumer prices on Wednesday showing
prices were unchanged in May for the first time in nearly two years. The July WTI contract
settled up 12 cents at $78.62 and the August Brent contract settled up 15 cents at $82.75. The
product markets ended the session higher, with the heating oil market settling up 4.6 cents at
$2.4868 and the RB market settling up 2.12 cents at $2.4156.
Technical Analysis: On Friday, the oil market is still seen trending sideways as the market
weighs conflicting demand outlooks, hawkish signals from the Federal Reserve and the
unexpected builds reported in the oil inventory reports. The crude market is seen finding
resistance at its highs of $78.89, $79.32, $79.42, followed by $80.62 and $80.93. However,
support is seen at its low of $77.67, $77.22, $76.71, $75.90, $75.23 -$75.21, followed by
$75.09, $74.06, $72.82 and $72.48.
Fundamental News: OPEC’s Secretary General, Hathaim Al Ghais, said OPEC does not see a
peak in oil demand in its long-term forecast and expects demand to increase to 116 million
bpd by 2045 and may be higher. He called the IEA report “dangerous commentary, especially
for consumers, and will only lead to energy volatility on a potentially unprecedented scale.”
He said similar narratives have been proven wrong previously. On Wednesday, the IEA said it
sees oil demand peaking by 2029, levelling off at around 106 million bpd towards the end of
the decade.
ANZ Research said it expects OPEC’s supply policy to remain sensitive to oil market
fundamentals. It said if demand fails to grow as they expect, they are likely to delay the
phasing out of the group of eight’s voluntary 2.2 million bpd cuts for oil. It said the likelihood
of oil prices surpassing $100/barrel for a sustained period had diminished greatly. ANZ
Research said it maintains its 12-month oil price target of $95/barrel. It said a combination of
improving market fundamentals, elevated geopolitical risks and a more positive economic
backdrop should lift the Brent crude price over $85/barrel, a level it has failed to breach over
the past six weeks.
Kpler shipping data is showing EU and UK diesel imports are on track to reach 768,000 b/d in
June down from 1.22 million b/d recorded in May.
The Russian government said Thursday it has extended its retaliatory measures against a price
cap on its oil imposed by Western countries until the end of 2024. The Russian government
has banned domestic oil exporters and custom bodies from adhering to Western -imposed
price caps on Russian crude oil.
The Russian energy ministry said on Thursday that while its oil production totals exceed its
OPEC+ quota in May, it was still pledging to make up for this over production during the
compensation period until September 2025. It also said its overproduction levels would be
resolved in June. Russian officials though did not disclose any specific production totals for the
month though.
Early Market Call – as of 8:30 AM EDT
WTI – July $78.90, up 28 cents
RBOB – July $2.4435, up 2.79 cents
HO – July $2.5208, up 3.4 cents