Recent Gains Suggest Stabilization After OPEC+ Production Hike Announcement
The oil market is showing signs of recovery after a recent downturn triggered by OPEC+’s decision to raise production later this year. Crude oil futures rose for a second consecutive day on Thursday, buoyed by the European Central Bank’s (ECB) interest rate cut—the first in five years—and growing speculation that the Federal Reserve will follow suit later this year.
Oil prices closed over 1% higher on Wednesday, breaking a losing streak set off by OPEC+’s plan to increase supply. The market rebound was further supported by weaker-than-expected private payroll data, which heightened expectations for a Federal Reserve rate cut in September. Current Fed futures trading indicates a roughly 70% chance of a rate reduction, which could spur economic growth and, consequently, boost oil demand.
“The May private payroll data yesterday also suggested a slowing labor market much to the delight of the Federal Reserve,” noted Tamas Varga, an analyst at oil broker PVM. “US equities climbed to fresh historic highs and the temptation was irresistible for oil, it faithfully followed.”
Thursday’s energy prices are as follows:
- West Texas Intermediate (July contract): $74.66 a barrel, up 59 cents (0.8%). Year to date, U.S. oil has gained 4.2%.
- Brent (August contract): $79.95 a barrel, up 54 cents (0.69%). Year to date, the global benchmark has risen 2.52%.
- RBOB Gasoline (July contract): $2.36 a gallon, up 0.59%. Year to date, gasoline futures are up 12.58%.
- Natural Gas (July contract): $2.87 per thousand cubic feet, up 4%. Year to date, natural gas is up 14%.
Despite being down about 3% this week following OPEC+’s agreement to phase out 2.2 million barrels per day in production cuts from October through September 2025, the recent uptrend suggests the market may be finding stability. Ryan McKay, senior commodity strategist at TD Securities, indicated that the past two sessions might signify a floor for oil prices.
JPMorgan analysts attributed the recent sell-off to the OPEC+ decision, compounded by weak manufacturing and jobs data, raising concerns about the U.S. economy. However, Saudi Arabia and Russia might maintain their production cuts through the year if demand fails to meet the increased supply.
Barclays analyst Amarpreet Singh noted, “We think oil markets have overreacted to the mildly negative OPEC+ meeting outcome. Demand indicators have certainly softened somewhat recently, but are not falling off a cliff, in our view.”
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