Crude oil started July higher, and the continued rally since the OPEC+ sell-off is certainly catching the attention of Federal Reserve policymakers. Initially, it seemed that the prospect of increased OPEC supply could weigh on the oil market for longer and provide more room for accommodative signals from central banks. However, this is not the case, and investors are gradually pricing in still relatively strong demand (especially in the US according to EIA data, despite weakening in China), as well as geopolitical risks and the prospect of the Gulf hurricane season, which could pose additional risks to the market’s supply. In addition, Hurricane Beryl, currently near the Caribbean Sea, has been upgraded to a Category 5, increasing risks to oil supply in the region. OPEC+ has decided to maintain current production cuts until 2025, fueling concerns about the balance between supply and demand as seasonal demand for oil peaks during the summer months.
- Brent crude prices are up nearly 0.9% today, ahead of the U.S. Independence Day holiday, although gasoline prices at U.S. gas stations are down $0.05 per month to $3.49 (AAA data). TD Securities reported that speculative long positions are rising due to tensions between Israel, Hezbollah and Iran;
- However, it appears that the geopolitical premium at this stage may support prices, but does not have the potential to lead to a vigorous increase from current levels;
- The weather season in the Atlantic and Indian Oceans is causing concern for investors, with Hurricane Beryl now classified as a storm, although Price Futures Group believes it does not have the potential to disrupt supplies in the Gulf;
- Currently, JPMorgan forecasts a global liquid crude oil deficit of 1 million barrels per day (b/d) in the third quarter of 2024, and a significant decline of 1.9 million b/d in August.
- The bank is forecasting prices at $90 a barrel in September; Fuel and oil prices would likely rise if a hurricane hits refining facilities along the Gulf Coast, so the weather in the region, in the short term, is likely to be more meaningful than usual for traders. Growth is being held back somewhat by the weaker Chinese economy, where orders are falling and domestic demand remains quite weak.
OIL (H1 interval)
Oil futures are off to a good start in July after rising 6% in June and are approaching their late April levels.
Source: xStation5
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