Investing.com – Crude oil prices rose on Thursday, bouncing after three days of selling, but overall sentiment remains weak, raising the chance that OPEC+ will roll over its production cuts at the June meeting, Citi said.
AT 10:10 ET (14:10 GMT), oil rose 0.7% to $82.45 per barrel, while West Texas Intermediate crude futures rose 0.7% to $78.14 per barrel.
Both benchmarks fell more than 1% on Wednesday, marking a third straight day of losses.
“The recent market weakness is driven by weaker data, including rising oil inventories, tepid demand, weak refining margins and the increasing risk of run cuts,” Citi analysts said in a May 22 note.
Geopolitical risks have eased but not gone, the bank said, as global oil inventories continued to show April equity build-ups extended into May so far, including in this week’s high-frequency data globally and in the US.
Moreover, funds continue to liquidate net length within the complex, amid a clear bearish turn in price trends and an erosion of geopolitical risk premia.
“Given this backdrop, we continue to expect OPEC+ to maintain its production cuts through the third quarter, and we expect the group to maintain this through the remainder of 2024 and the first half of 25 as our base case,” Citi said.
Any hint of tapering or even disagreement among OPEC+ producers ahead of/during the upcoming June meeting could be bearish for prices in the short term, the bank said.
A deeper cut would likely be a bullish surprise, but remains a low probability in our view, Citi added.
The Organization of the Petroleum Exporting Countries and Allies, known as OPEC+, is implementing voluntary production cuts totaling about 2.2 million barrels per day for the first half of 2024, led by Saudi Arabia reversing an earlier voluntary cut.
These cuts come on top of previous cuts announced in several steps since late 2022 and bring the total committed cuts to around 5.86 million barrels per day, equivalent to just under 6% of daily global demand.
