- Oil prices continue falling despite low inventories.
- Weak U.S. economic data and rumors of Saudi production increases weigh on market sentiment.
- Standard Chartered warns the price weakness may persist, citing Trump’s tariff policy, rising Kazakh and Iraqi output, and potential OPEC+ supply boosts despite tight inventory conditions.
Low inventories reported by the Energy Information Administration (EIA) did nothing to staunch the bleeding, with WTI getting gutted nearly 4% on the day, and Saudi rumors throwing another spanner in the works, while new U.S. economic data suggests more pain is in store for the sector.
Three weeks ago, eight OPEC+ countries unveiled plans to phase-out their voluntary oil output cuts by ramping up output in May by 411,000 barrels per day–equivalent to three monthly increments. The announcement came at a time when U.S. President Donald Trump announced tariffs on more than 90 countries across the globe, roiling oil markets. The eight OPEC+ countries are due to meet on 5 May to discuss production levels for June, just days after Washington released a worrying economic report. The U.S. economy shrank at an annualized 0.3% clip in the first quarter, marking the first contraction in three years, due to surging imports as companies rushed to stock up before Trump’s 90-day pause on elevated tariffs comes to an end. That’s a sharp turnaround in fortunes compared to the final quarter of 2024 when the economy expanded by 2.4%.
Further, unconfirmed reports on Wednesday indicated that Saudi Arabia is planning to push for increased production during the May 5th meeting, and it will most likely get its way, with Riyadh reportedly saying it could easily sustain lower oil prices for a longer period. And now commodity analysts at Standard Chartered have predicted the weakness in oil markets is likely to persist thanks to U.S. tariff policy despite oil inventories remaining low.
According to the latest weekly report by the Energy Information Administration (EIA), U.S. oil inventories remain low, with the deficit in combined U.S. crude oil, distillate and gasoline inventories below the five-year average widening to 47.4 million barrels (mb). The deficit has now more than doubled over the past three weeks to the widest in 20 months.
StanChart’s proprietary U.S. oil data bull-bear index is currently ‘highly bullish’ (i.e., in the strongest 15% of all data releases since 2013)–for three weeks in a row. StanChart notes that the last time a run of data was this strong was in early 2022, helped by strong tailwinds from pandemic recovery. Whereas complete OECD inventory data comes with more of a lag, the International Energy Agency (IEA) has noted that February was the sixth consecutive month of draws, with inventories at their lowest since September 2022.
JP Morgan Analysts Say Sentiment on Oil is Neutral to Optimistic
In a research note by Natasha Kaneva, Head of Global Commodities Strategy at J.P. Morgan, analysts at the company, including Kaneva, said “based on numerous recent discussions with institutional and corporate clients”, they “conclude that the sentiment on oil is neutral to optimistic, particularly within the corporate community”. “Many believe we are in a ‘peak Trump’ phase, suggesting that the worst is behind us and we are now entering a period of de-escalation,” the J.P. Morgan analysts stated in the research note.
“There is a prevailing view that the tailwinds from trade deal announcements and the administration’s shift in focus from tariffs to taxes and deregulation will drive oil prices back into the mid-$70s following the recent downturn,” they added.
In the note, the analysts said this perspective is evident in investor positioning and the term structure of oil and oil products. “Money managers increased their net-long positions in Nymex WTI to the highest level since late January last week, while short positions in Brent fell by the most since October,” they highlighted. “Brent’s prompt spread hit its strongest level since January, and open interest on Brent climbed to a new record, with Brent September $95 calls trading more than 10,000 times last Tuesday,” they added. “Additionally, the Nymex gasoline crack settled at its highest level since the start of the month, following an eight-week consecutive drop in U.S. stockpiles, and despite concerns related to demand, product cracks in the U.S. continue to remain firmly in backwardation,” they went on to state. The J.P. Morgan analysts noted in the publication that the recent de-escalation in trade talks has reduced the probability of a bear case but warned that “the ‘Trump put’ does not extend to energy, as the administration continues to prioritize lower oil prices to manage inflation”. “On the demand side, markets may be underestimating the final tariff levels that the Trump administration plans to impose on U.S. imports,” the analysts said in the note.
The J.P. Morgan research note showed that the company is projecting that Brent crude oil will average $66 per barrel in 2025 and $58 per barrel in 2026. The company expects WTI crude oil to average $62 per barrel this year and $53 per barrel next year, the note outlined.
According to the note, J.P. Morgan sees Brent averaging $67 per barrel in the second quarter of this year, $63 per barrel in the third quarter, $61 per barrel in the fourth quarter, $55 per barrel in the first quarter of next year, $57 per barrel across the second and third quarters of 2026, and $60 per barrel in the fourth quarter of next year.
J.P. Morgan expects the WTI price to come in at $63 per barrel in the second quarter of 2025, $59 per barrel in the third quarter, $57 per barrel in the fourth quarter, $51 per barrel in the first quarter of 2026, $53 per barrel across the second and third quarters of next year, and $56 per barrel in the fourth quarter of 2026, the note showed.
J.P. Morgan’s research note highlighted that Brent averaged $82 per barrel and WTI averaged $76 per barrel in 2024. It pointed out that the former averaged $81 per barrel in 2023 and the latter came in at $76 per barrel again in 2023
NN: so far the $58 brent low has held as expected. in fact we are $2.00 above. remember europe is closed today for commie day……. this is simply a buying opportunity…. fueled by the usual oil market baseless fake news induced panic