The Organization of Petroleum Exporting Countries and their allies, or OPEC+, maintained their projection for 2024 demand, which caused oil prices to decline early on Tuesday in the global commodity market.
In its June monthly oil market report, OPEC maintained its strong 2024 demand prediction despite market trepidation over U.S. inflation figures. In addition, the policy committee of the US Federal Reserve begins a two-day meeting that is anticipated to conclude with no change in interest rates.
In contrast to August Brent crude, the worldwide benchmark, which was down US$0.10 to US$81.53 per barrel, West Texas Intermediate crude oil for July delivery was last seen down US$0.18 to US$77.56 per barrel.
“More conviction may be needed in oil prices for a more sustained recovery with a move above the US$83.00 level, given that the broader trend for oil prices still leans on the downside with a series of higher highs since April,” Yeap Jun Rong, a market strategist with IG, said in the report.
OPEC maintained its 2024 demand forecast at 2.2-million barrels per day over 2023 levels in its June market report and its 1.2-million bpd forecast for production gains from non-OPEC countries.
According to market notes from major investment firms, the demand forecast is higher than the two other most influential forecasters.
The Energy Information Administration will update its forecast later on Tuesday with the release of its monthly Short-Term Energy Outlook, while the International Energy Agency will publish its June Oil Market Report on Wednesday.
Still, the market focus will be on Wednesday’s release of the U.S. May Consumer Price Index, which is likely to show inflation remains stubbornly above the Federal Reserve’s 2% target.
The data is expected to show inflation running unchanged from April at a 3.4% annualized rate, the consensus estimate according to Marketwatch, while the core rate, which excludes volatile items, is expected to fall to 3.5% annualized from 3.6% a month earlier.
The Federal Open Market Committee will end its two-day meeting Wednesday afternoon and is widely expected to leave interest rates unchanged at the highest since 2001.
However, some committee members have said they are in favor of raising rates further if inflation shows no sign of abating, even as central banks in Europe and Canada have begun cutting their policy rates.
“All bets are off when oil price pickers come face-to-face with the US CPI and FOMC decision due tomorrow,” PVM Oil Associates noted.
Brent broke back above $80/bbl with the oil market set to tighten in the third quarter, while US natural gas prices strengthened on forecasts for warmer weather.
Oil prices moved higher yesterday as the market continued its post-OPEC+ meeting recovery. ICE Brent settled more than 2.5% higher yesterday, which saw it close well above $81/bbl.
The action taken by the group leaves the market with a sizeable deficit in the third quarter of the year, supporting the view that prices trend higher, ING commodities strategists said in a note.
