Oil markets are experiencing huge volatility as they balance bullish and bearish factors, including rising U.S. crude production and the potential resumption of Iranian oil exports. The economic recovery in some of Asia's top oil-importing countries was less impressive than expected, with a weak industrial recovery and lower-than-expected oil demand weighing on global prices.
Wall Street is increasingly bearish on the outlook for oil prices. Last week, Goldman Sachs oil super bull Jeff Currie cut his December Brent forecast again to $86 a barrel from $95 and $100 a barrel previously.
Currie cited rising supplies from Russia, Iran and Venezuela; growing recession fears and the continued headwinds of rising interest rates on price increases as reasons for his growing pessimism on the oil market.
Analysts at Citigroup are also quite pessimistic, recently saying that Saudi production cuts are unlikely to remain in the high $80s or $90s due to subdued demand and non-OPEC supply ramping up before the end of the year.
However, the oil market found some relief after the Federal Reserve decided to pause rate hikes. The gains in oil prices were fairly modest after the Federal Reserve signaled another 50 basis point hike in interest rates by the end of the year. But a disappointing economic outlook in Asia also gave bulls pause.
Overall, the oil market has turned highly volatile this week as traders try to make sense of the mix of bullish and bearish drivers. Oil prices rose midweek after the latest EIA report showed crude refining had hit its highest level since August 2019 amid expectations of strong summer demand. However, the same report showed that U.S. crude oil production had reached its highest level since April 2020, while crude exports fell.
However, crude inventories at the WTI pricing hub in Cushing, Oklahoma, rose for a seventh straight week and are now near the five-year average. The w/w crude oil balance shows unusually large fluctuations in imports and exports. However, the most bearish news came from markets outside the US.
At 14:00 on June 19, Beijing time, the main contract price of Brent crude oil was quoted at US$75.69 per barrel.
