Today's Saxo Market Call podcast
Global Market Quick Take: Europe
The positive price impact of the April 2 surprise OPEC+ production cut continues to fade with incoming data showing some emerging demand weakness, especially for diesel, and following a rapid build-up in speculative longs in the week that followed, the market is now drifting lower, thereby raising the risk of traders attempting to sell Brent and WTI crude oil lower in order to close the gaps that were left when prices opened sharply higher on April 3.
As OPEC saw signs of emerging weakness in demand for its crude oil, the decision to cut production was made, and it is now becoming clear that the reason for the decision, apart from preventing prices falling further as speculators went on a selling attack amid the March technical downside break, was driven by the need to support its prized asset in order to maximise revenues at a time where US producers have shown limited appetite to boost production.
We keep the view that Brent look set to continued trading in the $80’s for the near future while we wait for the expected, albeit reduced, pickup in demand during the second half as projected and reiterated by OPEC, IEA and the EIA in their latest oil market reports. A development that will likely boost prices and aggravate an emerging supply deficit in 2H23. The recovery in demand, however, is still very uneven with China and a pickup in international travel accounting for the bulk of the increase.