Scraping the Barrel
This week should prove a stark reminder of how fragile the nascent crude price recovery is.
Anxiety was building ahead of the June OPEC meeting, but an exchange between Crown Prince Mohammed bin Salman and President Putin has put some of the pre-June OPEC meeting jitters on the back burner for now.
The market was speculating on the potential for tensions between Russia and Saudi Arabia to re-emerge at the OPEC+ meeting scheduled to take place on June 9, but they’ve reportedly agreed to honor their respective compliance commitments. So, the apparently harmonious outcome from this discussion has diffused a possible escalation of tensions between the two colossal producers that in March heralded in the most devastating oil price war on record.
On the US inventory front – and despite the chunky build in the more widely followed EIA inventory data confirming yesterday's gut on the API report – the market quickly greenlighted the oil price recovery after taking into consideration the big draw at the Nymex delivery point at Cushing and a 463,000 bpd increase in gasoline demand. With oil prices mapping tangentially to mobility congesting and traffic data, the uptake in gasoline demand provides quantifiable support to the empirical evidence.
But heightened tension between the US and China remains a risk for oil markets, especially if it spills over into impacting the global economy and its 2H recovery from the virus pandemic effect.
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