Oil Prices Edge Up After Hitting Four-Month Lows Amid OPEC+ Moves

Oil prices rise 0.2% after hitting four-month lows, Brent at $79.78 and WTI at $75.65 per barrel.

By Barry Stearns

6/10, 07:17 EDT
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Key Takeaway

  • Oil prices saw slight gains after three consecutive weekly losses, driven by OPEC+ plans to unwind voluntary production cuts.
  • Brent and WTI hit four-month lows last week amid bearish market sentiment and a stronger U.S. dollar.
  • U.S. oil rigs fell by 4 to 492, the lowest since January 2022, while gas rigs dropped by 2 to 98.

Oil Prices Attempt Recovery

Oil futures saw modest gains early Monday, attempting to stabilize after a tumultuous period marked by OPEC+ decisions and macroeconomic pressures. Brent crude futures rose 0.2% to $79.78 a barrel, while West Texas Intermediate (WTI) crude futures edged up 0.2% to $75.65 a barrel. This comes after both benchmarks hit four-month lows last week, driven by OPEC+’s announcement to unwind some voluntary production cuts starting in October. The decision to maintain overall production curbs through the end of 2025 while gradually increasing supply by 2.2 million barrels per day over the next 12 months has left the market in a state of flux.

Market Sentiment and Economic Data

The broader sentiment in the oil market remains bearish, as noted by ING strategists Warren Patterson and Ewa Manthey. The market's reaction to OPEC+’s announcement was amplified by algorithmic trading, leading to a 2.5% decline in Brent prices last week. Additionally, a stronger-than-expected May jobs report in the U.S. pushed up Treasury yields and the U.S. dollar, making dollar-denominated commodities like oil more expensive for international buyers. "Investors who overreacted to the OPEC announcement last week are trying to grasp the possibility that additional barrels might not end up entering into global supplies," said Priyanka Sachdeva, senior market analyst at Phillip Nova Pte.

Supply and Demand Dynamics

Despite the bearish sentiment, some bullish factors are emerging. The weekly tally of U.S. oil and natural-gas rigs from Baker Hughes showed a decline, with active oil rigs falling by four to 492, the lowest level since January 2022. The gas rig count also fell by two to 98, a level last seen in October 2021. Analysts from UBS and FGE expect oil prices to firm up, driven by solid summer transport demand and anticipated inventory declines. Goldman Sachs analysts project Brent to rise to $86 a barrel in the third quarter, citing a potential market deficit of 1.3 million barrels per day.

Street Views

  • Warren Patterson and Ewa Manthey, ING (Bearish on the oil market):

    "While broader sentiment in the oil market remains bearish."