Oil higher as supply risks outweigh growth concerns for now

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Constructive banter from OPEC nations are to be expected leading up to the next key meeting in June.  The outcome of the Jeddah talks shows that OPEC + members are on board to continuing production cuts throughout the rest of year, albeit if conditions warrant it.  Uncertainty on both the global demand front and stockpiles from Iran Venezuela and Libya will likely keep things volatile and possibly see oil-producing nations punt the 176th extraordinary meeting again, from June to July.  Saudi Arabia does not want a repeat from last year, when too many barrels came back to the market.

Geopolitics will remain key for oil and while the focus early this week lies with global growth concerns from an escalating trading war between China and the US, short-term differentials between spare capacity and output at risk should keep prices somewhat supported.

The OPEC + meeting over the weekend did not yield any surprises, with the most important comments coming from Russia, the most important non-OPEC partner in the coalition, hinting they could reduce production cuts if the market needs more crude.
The base case is slowly becoming OPEC and its partners will announce an extension of production cuts, especially if global growth concerns grow.  Russian could decide to argue they do not want to take part with further cuts, or they could just not comply.

Choppy conditions remain in place for crude traders, with upside relying on geopolitical events driving shocks to supplies.

West Texas Intermediate crude could be vulnerable to a move towards $60 a barrel, but if the bullish move continues, $69.50 could be major resistance.  The Canadian dollar is slightly firmer on the day against both the euro and US dollar.

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Ed Moya

Ed Moya

Contributing Author at OANDA
With more than 20 years’ trading experience, Ed Moya was a Senior Market Analyst with OANDA for the Americas from November 2018 to November 2023. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Prior to OANDA he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business, cheddar news, and CoinDesk TV. His views are trusted by the world’s most respected global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Seeking Alpha, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.