Oil Prices Rise on Anticipation of OPEC+ Production Decisions

Key Points:

• WTI crude prices climb amid OPEC+ cut speculation.
• U.S. inflation report crucial for Federal Reserve’s decisions.
• Brent and WTI recover from recent lows with support from market factors.

WTI crude futures have surged towards $79 per barrel, fueled by expectations that OPEC+ will extend its voluntary production cuts of 2.2 million barrels per day into the second half of the year at their June 2 meeting. This decision is anticipated to have significant implications for the oil market.

The upcoming U.S. inflation report is another critical factor, as it will influence the Federal Reserve’s monetary policy. Should the inflation data come in softer than expected, it could pave the way for earlier interest rate cuts, potentially spurring economic growth and increasing energy demand.

Both WTI and Brent crude are rebounding from three-month lows. The recovery is primarily driven by the belief that OPEC+ will continue its output cuts. Other supportive factors include the start of the U.S. summer driving season and a weaker dollar.

Further insight into demand trends will come from the upcoming U.S. PCE report, which will help gauge the Federal Reserve’s future actions. A lower-than-anticipated PCE reading could increase the likelihood of interest rate cuts, thereby enhancing energy demand.

Deutsche Bank has reaffirmed its Brent forecast at $83 per barrel for the second quarter and $88 for the latter half of the year, based on the assumption that OPEC+ will maintain its current production policy.

Should WTI prices rise above the $80 threshold, they might test the 50-day moving average, slightly above $81.1. The Relative Strength Index (RSI) suggests there is still potential for price growth before reaching overbought conditions. Conversely, if prices fall below $78, they may stabilize around $76.