Oil markets remain bearish on market risk aversion

Trading ~9.35% higher from lows made earlier this month, crude oil markets are expected to close in red this week on waning market risk appetite, oversupply fears and OPEC+ production policy.

• As markets adjust appetite towards risk, WTI and Brent crude prices are set to close in the red in this week’s trading, down ~0.72% and ~1.33% respectively
• A combination of macroeconomic factors continue to weigh heavily on oil markets, with fears of potential surplus in supply returning

Courtesy of IEA’s oil market report released on Wednesday, commercial crude oil inventories were observed to rise by some 1.3 million barrels, raising questions on current oil market demand.

Having predicted a decrease of 0.9 million barrels, the latest report not only fell short of expectations significantly but has also been dubbed as ‘counter-seasonal’, with oil demand historically increasing this time of year.

Compounded by the IEA’s May report, stating that global oil demand growth is now forecast to decrease some 41% for the remainder of the year, the combination of slowing demand and rising inventories is proving somewhat concerning for global oil markets, with one obvious outcome being lower prices.

Speaking ahead of their June 1st meeting, OPEC+ members are actively discussing a third consecutive increase in oil production, this time dubbed “super-sized”, in an apparent bid to secure a larger market share.

Responsible for 40% of global oil production, OPEC seems both willing and able to make short-term sacrifices to secure longer-term market share, with oil prices treated as an unfortunate collateral.

Despite the best efforts of a weaker dollar, crude has struggled to gain ground this week amid a renewal of market risk aversion.

Linked closely with global manufacturing and general economic productivity, oil prices continue to remain under pressure amid continued worries on trade tariffs, Trump’s latest tax bill and downbeat global economy growth predictions.

• Should price fall further, we can expect markets to find support around $60.50, $59.44 and $57.59.