Crude oil prices faced a downward trajectory, marking the third consecutive weekly loss, subsequent to the recent meeting of OPEC+ which hinted at a potential return of supply to markets later in the year, surprising market observers.
This possibility triggered a significant reaction among oil traders, leading to a notable initial plunge of over $3 in prices at the outset of the week. However, some relief was observed later in the week when officials from Saudi Arabia and Russia clarified that the return of supply was not assured, emphasizing that market conditions would dictate any such decision.
Addressing attendees at the Saint Petersburg Economic Forum, Saudi Energy Minister Abdulaziz bin Salman and Russia’s Deputy Prime Minister Alexander Novak emphasized the contingent nature of the decision-making process within OPEC+, highlighting the importance of market dynamics in guiding future actions.
Bin Salman also seized the opportunity to criticize Goldman Sachs for its pessimistic outlook on oil prices, asserting that the bank’s report following the OPEC+ meeting, titled “Bearish phase out of extra voluntary cuts,” contained inaccuracies and an overly negative tone.
In contrast to Goldman Sachs, JP Morgan suggested that the potential supply return might not exert a significant downward pressure on prices, given that several OPEC+ members were already exceeding their production quotas. Citi echoed a similar sentiment, dismissing concerns over supply return and anticipating a full extension of production cuts into the following year.
However, Jarand Rystad from Rystad Energy cautioned that further production cuts might be necessary due to a slight softening in demand coupled with ample supply, unless adjustments are made.
Additionally, oil prices received some support during the week from the European Central Bank’s announcement of a rate cut, the first in five years, on Thursday. Despite indications to the contrary, many market participants anticipate a similar move from the Federal Reserve in the near future.
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