Oil Market Outlook
Oil prices fell last week as Opec+ members agreed to extend most of their oil production cuts until the end of 2025, though members could be allowed to restore some output starting in October if market conditions permit.
Investors also digested data that showed demand growth slowing in the US, China and Europe, as high interest rates and inflation pressure consumer demand and industrial activity.
Data showing a rise in US crude inventories of 1.2 million barrels, against forecasts for a decrease of 2.3 million, also affected sentiment.
West Texas Intermediate (WTI) crude fell $1.46 to close at $75.53 per barrel. Brent lost $2.00 to $79.62 and Dubai crude averaged $80.05. Thaioil forecasts that WTI this week will trade between $71 and $81, and Brent between $75 and $85. Prices are expected to recover from recent four-month lows, as investors monitor the Israel-Hamas and Ukraine-Russia conflicts among other developments. However, prices could remain under pressure as the market considers the implications of the latest Opec+ decisions. Among the factors expected to influence trade:
■ Opec+ agreed to extend voluntary production cuts of 1.66 million barrels per day to the end of 2025 instead of 2024 to support prices. Other cuts of 2.2 million bpd were extended to Sept 30, after which members will be free to decide production levels. Members also approved an increase of 300,000 bpd in the UAE quota, effective from January to December 2024. The resulting increase in supply could pressure crude prices.
■ Israel has rejected the latest ceasefire agreement proposed by the US and is continuing with its assault in Rafah in southern Gaza. In Russia, meanwhile, the risk to its energy infrastructure has risen now that Washington has given Ukraine permission to use longer-range, US-provided weapons for strikes inside Russia.
■ Indian PM Narendra Modi’s Bharatiya Janata Party fell well short of a majority in the election, meaning he will be forced to take on coalition partners for the first time. The resulting bargaining is expected to affect fiscal budget approvals and government spending, possibly slowing activity in a major oil market.
■ Signs of a slowdown are emerging in the US, with May manufacturing PMI slipping to a three-month low of 48.7, from 49.2 in April. First-quarter GDP growth was revised down to 1.3% from 1.6% to reflect weaker consumer spending. In China, May manufacturing PMI of 49.5 was lower than forecasts of 50.5 and down from 50.4 in April.
■ Economic indicators to watch include Chinese and US CPI and manufacturing price updates.