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WTI holds firm after rally
Crude oil futures held on to gains on Tuesday as OPEC maintained its demand forecasts, counting on steady economic growth this year.
Oil prices rose more than 2% on Monday as US crude oil posted its best day since February 8. The market recovered last week’s losses after hitting four-month lows following OPEC+’s decision to increase oil production in October.
Here are Tuesday’s closing energy prices:
- West Texas Intermediate July contract: US$77.90 per barrel, up 16 cents or 0.21%. Year to date, US oil has gained 8.7%.
- Brent August contract: US$81.92 per barrel, up 29 cents, or 0.36%. Year to date, the global benchmark index is ahead by 6.3%.
- RBOB gasoline July contract: $2.40 per gallon, little change. Year to date, gasoline rose 14.5%.
- Natural gas July contract: US$3.12 per thousand cubic feet, up 7.67%. Year-to-date, gas increased 24%.
OPEC forecasts oil demand growth of 2.2 million barrels per day for 2024 and 1.8 million bpd in 2025, according to the group’s monthly report. Oil producers see global economic growth of 2.8% this year and 2.9% in 2025.
OPEC expects the services sector to maintain stable dynamics and boost economic growth in the second half of the year, “particularly supported by travel and tourism, with the consequent positive impact on oil demand”.
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WTI x Brent
John Evans, an analyst at oil broker PVM, said traders appeared to be “buying the dip” after many investors exited their long positions following the OPEC+ production decision.
“After oil prices experienced a confluence of bearish events, swung wildly and toyed with the possibility of being oversold, there is almost an inevitability in the recovery back to current levels,” Evans said in a note.
Money managers reduced their net long position in Brent by 69% week over week to the lowest level since 2014 following the OPEC+ decision, according to JPMorgan.
Despite bearish sentiment last week, Goldman Sachs predicts the market will enter a fuel demand deficit in the summer, which will push Brent back to $86 per barrel in the third quarter.
Phil Flynn, senior market analyst at Price Futures Group, said “the market appears to have woken up” to the fact that the world is “sleepwalking toward a global oil supply deficit” given that oil production cuts OPEC remain in place for now and the number of rigs is falling in the US
Traders are awaiting the conclusion of the Federal Reserve meeting and US inflation data for May on Wednesday. The International Energy Agency will release its monthly report on the oil market on the same day.