Crude oil has started July with gains, and the ongoing rally since the sell-off caused by the OPEC+ decision is certainly attracting interest from Federal Reserve policymakers. Initially, it seemed that the prospect of OPEC increasing supply would weigh on the oil market for longer and give more room for 'dovish' signals from central banks. However, this has not been the case, and investors are gradually pricing in still relatively strong demand (especially in the US according to EIA data, softened by weaker China), as well as geopolitical risks and the prospect of a hurricane season in the Gulf, which could pose additional risks to market supply. Also, the hurricane Beryl which is now near the Caribbean Sea had improved 'category to 'Category 5' hurricane, posing risks to oil supply in the region. OPEC+ has decided to extend ongoing production cuts through 2025, fostering concerns about supply and demand balance, while seasonal oil demand peaks, during the summer months.
- Brent oil prices are gaining nearly 0.9% today, ahead of the Independence Day holiday in the U.S., although gasoline prices at U.S. stations fell $0.05 m/m to $3.49 (AAA data). TD Securities indicated that speculative long positions are on the rise due to tensions between Israel and 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 rise from current levels;
- The weather season in the Atlantic and Indian Oceans is causing some concern for investors, with Hurricane Beryl now in the storm category, although Price Futures Group believes it does not have the potential to disrupt supply in the Gulf;
- Currently, JPMorgan is forecasting a global liquid crude oil deficit of 1 million barrels per day (bpd) in the third quarter of 2024, and a significant decline of 1.9 million bpd in August.
- The bank expects prices at $90 per barrel, in September; Fuel and oil prices would likely rise if a hurricane were to hit refining facilities along the Gulf Coast, so weather in the region, in the near term, is likely to be more significant than usual for traders. Growth is somewhat constrained by the weaker Chinese economy, where orders are falling, and domestic demand remains quite weak.
OIL (H1 interval)
Oil futures are recording a successful start to July after a 6% rise in June and are approaching levels not seen since late April.
Source: xStation5
