Oil prices are facing a downward trend as the
market reacts to the recent news of OPEC+’s
output cut. Brent crude had initially gained $7
after the Organization of Petroleum Exporting
Countries and its allies announced a pledge to
reduce production, but most of the gains have
since been erased. Additionally, global supplies
are showing signs of growth as Russia’s crude
exports have bounced back above 3 million
barrels a day, despite the country claiming to
have lowered output.
The current state of the global fuel market is
not helping matters. Gasoline and diesel
should be peaking, but instead, they are
slowing down. Asian refiners are even
considering cutting volumes due to weakened
margins, indicating that they were unable to
pass on higher costs to consumers.
Standard Chartered’s Executive Director of
Energy Research, Emily Ashford, believes that
the excitement surrounding the OPEC+ cuts
has faded, leading to light flows. Technical
indicators have also contributed to the
downward trend as the US benchmark failed to
break through its 200-day moving average last
week, prompting a corrective move to fill the
chart gap created by the $7 jump in prices
after OPEC+’s announcement.
In March, oil hit a 15-month low due to bank
turmoil that shook confidence across all
markets. The combination of the surprise
announcement by OPEC+ on production cuts,
coupled with a reduction in Iraqi flows, pushed
oil back into the $80-range. Despite the current
trend, many market watchers are still
optimistic about China’s demand rebound, as
the country’s economy grew at the fastest pace
in a year, putting it on track to reach its growth
goal.
In conclusion, while the recent news of OPEC+’s
output cut initially had a positive impact on oil
prices, the gains have since been erased, and
technical indicators and weakened fuel
margins are contributing to the current
downward trend. However, market watchers
are still optimistic about China’s demand
rebound and its potential impact on oil prices.
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