WTI steadies in the low-$60.00s as markets focus on pre-OPEC+ meeting source reports

• WTI has been on the back foot on Tuesday, dropping into the low-$60.00s but remaining supported above the big figure.
• Sources have begun leaking OPEC+ member views/opinions head of the meeting and will continue to attract a lot of focus.

Crude oil markets have been on the back foot on Tuesday and have steadily been unwinding gains seen on Monday. Front-month futures contracts for WTI have dropped into the low-$60.00s, but for now, remain supported above the big figure. Just below the $60.00 level is further support in the form of the 50-day moving average, which currently sits pretty much bang on the $59.50 level, a level which came in handy as support on Monday. It seems likely that ahead of Thursday’s OPEC+ meeting, crude oil markets will continue to chop within the bounds of the 21 and 50DMAs (the former sits just above $62.50).

Driving the day

This week’s OPEC+ meeting is taking centre stage. As expected given that the Saudi’s would like crude oil prices to be in the $80s per barrel, sources reported that Saudi Arabia is ready to support an extension to the current OPEC+ output cuts until the end of June and is also prepared to extend its own voluntary cuts over the same period in order to allow global demand more time to recover. Unsurprisingly, the Russians (who are typically happy as long as crude prices are above $40-$50 per barrel) are taking a more hawkish stance, with sources suggesting Tuesday that the country’s recent small increase in supply has not been enough to meet demand growth.

Note, the Joint Technical Committee met on Tuesday; this is a technical committee off delegates from OPEC+ nations whose job it is to analyse the situation in oil markets and (sometimes) provide policy recommendations to the oil ministers who make up the OPEC+ cartel. Reportedly, OPEC+ delegates are revising lower their estimates of oil demand, which somewhat undermines the Russian argument that their recent supply increase was not enough to meet demand – revising lower demand estimates makes sense with most countries in the EU having recently tightened lockdown restrictions significantly. The OPEC Secretary-General Mohammed Barkindo was sounding dovish on Tuesday, saying the cartel needs to remain cautious and attentive to market conditions, which makes sense in lieu of the recent pullback in prices from earlier monthly highs.

Most analysts expect the cartel to roll over current output cuts, given recent weakness in prices and the above-mentioned demand concerns and, given recent sources, the Saudis are now expected not to begin unwinding their voluntary 1M barrel per day in production cuts. There is a risk, however, that the Russians will push for an increase in production, which could cause some anger/consternation amongst other members who want to hold output steady and don’t want the Russians driving prices lower.

In terms of other themes driving oil markets; geopolitics is worth keeping an eye on, as ever, with the Saudis having to shoot down more Houthi drones. Looking ahead, weekly private API inventory data will be released from 21:30BST and could trigger some oil market volatility.