The International Energy Agency's May Oil Market Report was released yesterday.
Let's highlight the key points of this report:
“Global oil demand is set to rise by 1.1 mb/d in 2024, 140 kb/d less than projected in last month’s Report as weak deliveries, notably in Europe, shifted first-quarter OECD demand into contraction.”
“World oil supply is projected to increase by 580 kb/d this year to a record 102.7 mb/d as non-OPEC+ output rises by 1.4 mb/d while OPEC+ production falls 840 kb/d, assuming that voluntary cuts are maintained. Global gains of 1.8 mb/d are expected in 2025 as non-OPEC+ adds a further 1.4 mb/d.”
Concerns about a wider Middle East conflict subsided and softer macro sentiment weighed on prices. Concerns about the global economy and oil demand triggered the sell-off.
“Poor industrial activity and another mild winter have sapped gasoil consumption this year, particularly in Europe where a declining share of diesel cars in the fleet were already undercutting consumption. Following a 210 kb/d annual contraction in 2023, European gasoil demand declined by another 140 kb/d year-on-year in the first quarter of 2024. Combined with weak diesel deliveries in the United States at the start of the year, this was enough to tip OECD oil demand in the first quarter back into contraction.”
“Even if OPEC+ voluntary production cuts were to stay in place, global oil supply could jump by 1.8 mb/d compared with this year’s more modest 580 kb/d annual increase.”
In summary, the findings of this report indicate that there is an excess of global oil supply over demand.
The state of the global oil market will be a key topic of discussion when OPEC+ ministers meet in Vienna on June 1 to set policy for the rest of the year. And the adoption of the final agreement to extend oil production cuts will have an upward impact on prices, including Brent.
From a technical point of view, the Brent chart has previously formed a head and shoulders pattern, which was broken down at $85.0 per barrel and brought prices down to the current level.
The OPEC+ meeting and the agreement to cut supply is likely to be the trigger that will send oil prices back up to retest the broken 85.0 level.
The overall recommendation is to buy Brent oil.
Profit could be taken at the level of 85.0. Loss could be fixed at 80.0.
The value of possible loss should not exceed 2% of your deposit funds.
This content is for informational purposes only and is not intended to be investing advice.
