James Hyerczyk
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Brent Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures closed higher for the week, as OPEC+’s ability to control production and stabilize the market as the global economy returns to health and demand eventually recovers to pre-pandemic levels, helped lift investor confidence. However, gains were capped by worries about the impact of rising COVID-19 cases in India, Japan and Brazil.

Last week, June WTI crude oil settled at $63.58, up $1.44 or +2.32% and July Brent crude oil finished at $66.76, up $1.34 or +2.01%.

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In other news, U.S. crude oil stockpiles edged higher last week, rising less than expected as refiners ramped up activity, while distillate inventories slumped on stronger demand, the Energy Information Administration (EIA). Gasoline stocks also rose less-than-expected.

Additionally, U.S. energy firms added oil and natural gas rigs last week, leading to a ninth straight monthly rig count increase, as a recovery in prices lured some drillers back to the wellpad.

OPEC+ Output Decision Lifts Prices

Helping to drive prices higher this week was the news that OPEC, Russia and their allies will stick to plans for a phased easing of oil production restrictions from May to July amid upbeat forecasts for a recovery in global demand and despite surging coronavirus cases in India, Brazil and Japan.

Earlier in the week, OPEC+ members cancelled a ministerial meeting after deciding to stick to policies broadly agreed at a previous April 1 meeting, Russian Deputy Prime Minister Alexander Novak said.

At the April 1 meeting, the group agreed to bring 2.1 million bpd back to the market from May to July, easing cuts to 5.8 million bpd. This is down from a cut of about 8 million bpd earlier in the year.


OPEC+ Oil Demand Forecast Provides Further Support

The OPEC+ joint technical committee (JTC) voted to keep its forecast for growth in global oil demand this year, but is concerned a-19 cases in India and elsewhere, three sources from the producer group told Reuters.

“Demand growth is still at 6 million bpd for 2021,” one of OPEC+’s sources said.

Weekly Outlook

With OPEC+ out of the way, the focus this week will continue to be on the COVID-19 cases in India, Japan and Brazil. Last week’s spike to the upside is a clear indication that investors believe the jump in cases is only temporary, but the market has yet to define what “temporary” means. Therefore, this story could be the source of volatility.

While the rise in COVID-19 continues to be a concern, the market appears to be underpinned by the notion that investors have confidence in the latest OPEC+ supply forecast that calls for commercial oil stocks to reach 2.95 billion barrels in July, taking them below the 2015 – 2019 average and that they will stay below the average the rest of the year.

OPEC+ also said it saw stocks at about 70 million barrels below the average for the whole of 2021, a more optimistic outlook than its previous forecast of 20 million barrels below the average.

Also as we approach the summer driving season in the United States, traders will start to place greater emphasis on U.S. refinery activity and the level of gasoline inventories.

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