Crude’s next cue may come when the Organization of Petroleum Exporting Countries and its allies meet next week. Delegates have said the alliance, led by Saudi Arabia and Russia, looks set to rubberstamp oil-output increases.
With the U.S. economy recovering from the coronavirus pandemic, more drivers are taking to the roads and stockpiles are drawing. Monday marks Memorial Day, giving Americans a long weekend that sees the start of the summer driving boom.
Yet that positive market picture is clouded, at least for now, by concerns that international talks on reviving the Iran nuclear accord will pave the way for increased oil supplies from the country. Meanwhile, the threat of virus variants and fresh outbreaks in parts of Asia continue to curb demand in some regions.
“Traders are eyeing a bullish summer for oil even with Iran’s return to the party,” said Stephen Brennock, an analyst at PVM Oil Associates Ltd. “This month can be summed in one word: hesitation.”
Ministers from the OPEC+ alliance are set to meet on June 1 to assess the global market and their production policy. All but four of 24 analysts and traders surveyed by Bloomberg predict they’ll ratify an 840,000-barrel-a-day increase scheduled for July, completing a three-part process to revive just over 2 million barrels this summer.
The market’s positive outlook is reflected in WTI’s longer-term spreads. The price of the U.S. benchmark for December 2021 was as much as $5 a barrel higher than futures for the same month in 2022. The differential has expanded by almost $1 this week to hit the highest since mid-March.