The recent downward trend in oil prices haltered this week driven largely by US payroll data which showed that 253k non-farm US jobs were added in April, well above the 160k anticipated and the revised 165k previously. The unemployment rate hit 3.4% last month, the lowest level since 1969.
Sentiment was further bolstered by Chinese tourist travel data that showed 274 million mainland domestic trips were taken over the Golden Week holiday period. This is a bright spot on what has been general market disappointment for the economic rebound on China’s reopening.
Some analysts are now suggesting that the recent slide in oil prices is starting to bottom out, predicting that a more significant pickup in the coming quarter is in the cards.
Oil prices saw their third consecutive weekly decline last week, marking the longest losing run this year. However, that may soon come to pass, according to some market watchers.
“Now it definitely feels like they’re at the bottom — there are multiple signs of that,” said Citi’s Global Head of Commodities Research Ed Morse.
Inventories built a lot during the first and second months of the year, and then they’ve come off. So that’s part of figuring that it’s at the bottom.”
He added that markets are currently facing the impact of OPEC+’s recent production cuts, and the world is moving into a higher demand season. Last month, the oil cartel announced it was slashing output by 1.16 million barrels per day. The cuts came into effect in May and will run until the end of 2023. The production declines prompted some analysts to warn prices could surge to triple digits, which failed to materialize.
“We’re looking more positively at the second and third quarter than what’s happened in the first quarter,” Morse said.
Financial services company ANZ also believes that the oil slump could bottom out soon, with global oil demand set to grow by 2 million barrels per day, keeping the market under-supplied throughout 2023.
“OPEC+ output cuts and a rebound in China’s demand will likely offset slower demand elsewhere. Therefore, we expect prices to bottom out soon,” the bank wrote in a research report dated May 8.
Similarly, Goldman Sachs has maintained its forecasts for a higher crude oil price tag.
“Our forecast remains that Brent rises to $95 per barrel by December and $100 per barrel by April 2024 as we expect large deficits in H2,” the investment bank stated in a report released over the weekend.
However, the global economic landscape remains fragile and filled with uncertainty as the Russia – Ukraine conflicts shows no end in sight.
Fuel card users can expect to see a small increase in then region of .50ppl for next week depending on their card type.
