Better than expected market fundamentals and expectations of forthcoming interest rate cuts by the U.S. Federal Reserve are helping keep oil prices on a bullish trajectory this week, Rystad Energy Global Market Analysis Director Claudio Galimberti said in an oil macro update sent to Rigzone by the Rystad Energy team on Tuesday.
“Rystad Energy modeling suggests most of the price increases have been driven by bullish fundamentals, specifically on the refining and crude side, while macroeconomic factors and ongoing concerns regarding the escalation of conflicts in the Middle East and Ukraine have played a secondary, albeit non-negligible, role,” Galimberti noted in the update.
Brent prices increased by more than six percent in June, Galimberti highlighted in the update, noting that July “is starting on a similar path”.
“Looking at the fundamentals, we have significantly lowered our forecast for U.S. oil production from August onwards,” Galimberti stated in the update.
“These adjustments reflect a downturn in Permian oil output due to ongoing low activity and consolidation through mergers and acquisitions,” he added.
“Most changes are concentrated on the Texas side, while New Mexico has shown resilience, although April data reflects a decline in monthly figures, averaging a fall of approximately 80,000 barrels per day (bpd). Overall, the downward adjustment from August 2024 through December 2025 averages about 200,000 bpd,” he continued.
These adjustments are bullish for Brent prices and support a narrowing of the WTI-Brent spread, Galimberti noted in the update.
“It should help provide some relief for OPEC+, given the production cuts they have implemented and the planned unwinding of the voluntary reductions starting in October, for the following 12 months,” he said.
In the update, Galimberti stated that recent reports suggest OPEC+ crude exports declined in June versus May but added that the latest official data showed steady exports from the Middle East and declining exports from Russia in May.
“If crude exports from OPEC – after accounting for changes in crude burns and refinery runs – are confirmed to have declined by somewhere between three percent and four percent in June, then that may point to greater compliance by OPEC members,” he said in the update.
“However, that is still speculative,” he added.
Galimberti noted in the update that Russia’s seaborne crude flows in the week to 23 June appear to have dropped by 0.66 million barrels per day, “to the lowest in more than three months”.
“The combined effect of lower crude exports from OPEC and Russia, right at the time when global refinery runs are expected to further rump up – from 83.1 million barrels per day in June to 84.4 in August – would explain the tighter crude market and the surge in Brent prices over the past three weeks,” he added.
Focusing on macroeconomics in the update, Galimberti said the latest data from the Bureau of Economic Analysis (BEA) showed that U.S. inflation, measured by the personal consumption expenditures (CPE) index, eased further to 2.6 percent year on year in May, matching expectations.
“The core PCE, excluding food and fuel prices, also decreased to 2.6 percent, the lowest since March 2021,” he highlighted.
“These figures are pivotal for the Federal Reserve’s upcoming rate-setting decision on 31 July, with markets anticipating at least two quarter-point rate cuts this year, potentially starting in September,” he continued.
“Despite the encouraging inflation data, a September cut remains uncertain as the pace of decline remains slow, which may be perceived as too gradual,” Galimberti went on to state.
In a research note sent to Rigzone by the JPM Commodities Research team on Monday, J.P. Morgan analysts said their “long-held view remains unchanged”.
“We project Brent oil to average $84 per barrel in the third quarter and hit another $90 by August/September, underpinned by our expectations that global demand will outpace supply in the summer quarter,” they added.
“Demand indicators look solid, especially in the all-important U.S. market and peak refinery demand for crude is now firmly in place and should last through August. Meanwhile, OPEC waterborne crude exports are trending at their lowest monthly volumes in two years so far in June,” they continued.
“Crucially, despite the 10 percent price rally, the short base by speculative investors has not been closed, with more room for financial demand to recover,” the analysts went on to state in the note.
In a separate research note sent to Rigzone by J.P. Morgan on Monday, analysts at the company noted that “the estimated value of open interest across energy markets increased by a modest $2.3 billion week on week”.
In that note, the analysts said the increase was primarily driven by crude oil and petroleum products mainly on the back of stronger prices across the curve.
“Our oil strategists highlight solid demand indicators, especially in the U.S. market and continue to project a global oil liquids deficit of one million barrels per day in the third quarter and 1.9 million barrels per day in August, reiterating their $90 view on Brent crude by August/September,” the analysts said in that note.
Source: www.rigzone.com
- Energies Media Staffhttps://energiesmedia.com/author/oilmanwp/
- Energies Media Staffhttps://energiesmedia.com/author/oilmanwp/
- Energies Media Staffhttps://energiesmedia.com/author/oilmanwp/
- Energies Media Staffhttps://energiesmedia.com/author/oilmanwp/
- Energies Media Staffhttps://energiesmedia.com/author/oilmanwp/
- Energies Media Staffhttps://energiesmedia.com/author/oilmanwp/
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