- Crude oil prices are on track for a weekly decline as reduced geopolitical tensions in the Middle East ease fears of supply disruptions.
- Despite recent draws in US crude and fuel inventories, the market’s focus is shifting to potential tariff removals and the upcoming OPEC+ meeting in early July.
- Analysts anticipate that increased OPEC+ production could lead to a significant oil market surplus by the end of the year, assuming continued regional stability.
prices were set to end the week lower than they started it as Israel and Iran stopped bombing each other, alleviating fears of a supply disruption in the Middle East.
At the time of writing, was trading at $68 per barrel, with West Texas Intermediate at $65.55 per barrel. That’s down from over $77 for Brent crude and $73 per barrel for WTI at the end of last week.
Still, both benchmarks inched higher on Thursday this week, after the U.S. Energy Information Administration reported a draw in both crude oil and fuel inventories, and signs of strengthening demand and a ramp-up in refining activity.
“The market is starting to digest the fact that crude oil inventories are very tight all of a sudden,” Phil Flynn, an analyst from Price Futures Group, told Reuters.
ING analysts, meanwhile, noted that now that the risk of a Middle Eastern supply disruption was off the table, focus would return to tariffs. The U.S. is due to finalise trade agreements with 10 countries after reaching a deal with China earlier in the month.
If the other ten deals are successful, which will likely be the case, the tariff threat will also be removed from the oil market, which may provide a boost for demand and, consequently, prices. A cheaper U.S. dollar should also help. The greenback slumped this week on reports that President Trump was going to make his Fed chair pick early.
Besides the tariff business, ING also noted OPEC+’s next meeting, due to be held on July 6, which the bank’s analysts expect will result in yet another 411,000-bpd production boost. “These supply hikes should ensure that the oil market moves into a large surplus towards the end of the year.
This assumes we don’t see a re-escalation in the Middle East, which would lead to supply losses,” Warren Patterson and Ewa Manthey wrote.