OPEC+ production and export cuts and slowing US oil production growth could play a role for valuations in the second half of the year. US PMI data released today pointed to a surprisingly robust rebound in manufacturing. The stronger reading from the USA offset much weaker readings from the Eurozone and a still gloomy demand landscape in China (which, however, is trying to be offset by announcements of economic stimulus measures being introduced).
While the long-term macro outlook remains uncertain, markets see little short-term risk to oil, helping to 'unleash' demand. According to Baker Hughes data on Friday, the number of oil rigs in the US fell to 669 last week (406 fewer than at the start of 2019, before the pandemic). All this comes amid record oil demand this summer. So far this year, Baker Hughes has estimated the loss of more than 100 active oil rigs.
Goldman Sachs shared a bullish forecast for the oil market deficit, where it estimates a return to USD 86 per barrel. According to analysts, prices will be driven by record high demand, in an environment of lower supply and reduced supply will lead to a large market deficit. The deficit in the second half of this year is estimated by Goldman Sachs to be as high as 2 million barrels in Q3.
An equally important factor for the oil market is the largest negative positioning on futures contracts based on the commodity since 2020. In the event of such a market tilt, any further movements could be characterised by greater scope and volatility.
Russian oil exports from mid-June to mid-July fell to probably their lowest level in six months. Moreover, Russia is preparing to cut exports by 500 000 barrels per day in August. Saudi Arabia's oil exports also began to fall, to below 7 million barrels per day in May for the first time in many months. Saudi Arabia reduced production by 1 million barrels per day in July and August.
WTI crude oil prices have broken out above the 200-day exponential moving average (EMA200, golden curve) and are currently testing resistance set by the 23.6% Fibo retracement of the downward wave initiated in April 2022. Source: xStation 5
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