OPEC+ and global supply risks to put a floor in crude markets - TDS

TD Securities analysts suggest that strong fundamentals are likely to offer support in the near term at $50/bbl and $60/bbl for WTI and Brent respectively after crude oil felt the burn from the Mexico and China trade war worries, while also having to contend with bearish US inventory stats.

Key Quotes

“Despite the fact the OPEC countries cannot decide on a date for their meeting, Saudi and Russia have been talking up the need for an extension. The $60/bbl level in Brent is a pain point for Russia, and certainly Saudi, and it is no surprise the recent selloff prompted both parties to talk up extended cooperation from OPEC+ on production cuts. Comments this morning from Russia's Novak that he sees a high risk of oversupply and potentially $40/bbl oil in the second half of the year if there is no extension is just the latest hint that the countries will come to an agreement.”

“Add to this the likely continued decline in Venezuelan production amid the restriction on US diluent exports, the constant geopolitical risk in Iran and Libya, and the eventual increase in refinery utilization in the US after floods and outages recover, and the global fundamentals appear much stronger. Furthermore, the easing of Mexico tensions and the somewhat short term nature of floods and refinery outages which have have constrained US crude demand.”