Oil prices hold firm after rally as OPEC sticks to demand and steady economic growth forecasts

Environment

Crude oil futures were little changed Tuesday as OPEC stuck to its demand forecasts, counting on steady economic growth this year.

Oil prices rallied more than 2% Monday and have now recovered most of the losses from last week. The market had sold-off to four month lows after OPEC+ decided to increase crude production in October.

Here are today’s energy prices:

  • West Texas Intermediate July contract: $77.63, down 11 cents or 0.14%. Year to date, U.S. oil has gained 8.4%.
  • Brent August contract: $81.54 a barrel, down 9 cents, or 0.11%. Year to date, the global benchmark is ahead 5.9%.
  • RBOB Gasoline July contract: $2.39 per gallon, down 0.57%. Year to date, gasoline is up 14%.
  • Natural Gas July contract: $3.07 per thousand cubic feet, up 5.78%. Year to date, gas has advanced 22%.

OPEC is projecting oil demand growth of 2.2 million barrels per day for 2024 and 1.8 million bpd in 2025, according to the group’s monthly report. The oil producers see global economic growth of 2.8% this year and 2.9% in 2025.

OPEC expects the services sector to maintain stable momentum and drive economic growth in the second half of the year, “particularly supported by travel and tourism, with a consequent positive impact on oil demand.”

John Evans, analyst with oil broker PVM, said traders appeared to be “buying the dip” after many investors abandoned their long positions in the wake of the OPEC+ production decision.

“After oil prices experienced a bearish confluence of events, shook out much length and toyed with being oversold, there is almost an inevitability in the rally back to current levels,” Evans said in a note.

Money managers cut their net long position in Brent by 69% week over week to the lowest level since 2014 in the wake of the OPEC+ decision, according to JPMorgan.

Despite the bearish sentiment last week, Goldman Sachs forecast the market will enter into a deficit on summer fuel demand that will push Brent back up to $86 per barrel in the third quarter.

Traders are looking ahead to the conclusion of the Federal Reserve meeting and U.S. inflation data for May on Wednesday. The International Energy Agency will release its monthly oil market report the same day.

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