The Ceyhan oil terminal on Turkey's Mediterranean coast. Recent developments in Iraq could keep a short-term lid on crude prices. Oil exports from the Kurdish north to the Turkish seaport at Ceyhan were halted amid disputes with Baghdad, though both sides shook hands last week.
BURHAN OZBILICI/APFrom OPEC’s monthly report to upcoming data on inflation levels in the world’s leading economies, analysts expect a bumpy ride for the price of oil amid a search for a clear market direction.
Both major crude oil indices, the global Brent and West Texas Intermediate, jumped 6 percent at the start of trading last week in response to the surprise decision from the Organization of the Petroleum Exporting Countries to trim production by 1.6 million barrels per day come May.
With a steady string of bad reports on the jobs front in the U.S. economy, however, last Monday set the ceiling as prices barely moved over the rest of the week.
Jeff Mower, oil news director for the Americas at S&P Global Commodity Insights, said that, last Monday aside, crude oil prices are looking range-bound again at around $80 per barrel for WTI.
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“Crude could break out of that range, of course,” he said. “U.S. refiners are returning from maintenance, which should bolster demand for crude. And export demand for U.S. crude remains strong, particularly out of Asia and Europe."
Data last week showed a sizable draw on U.S. crude oil inventories amid high refinery runs and strong export levels. Both trends should continue and keep markets tight.
The data calendar this week is busy, starting with a gauge of Chinese inflation on Monday. The Asian Development Bank said last week that support from China should carry the rest of the Asian economies higher. A region-wide expansion of 4.8 percent is expected this year as inflation is projected to moderate to 4.2 percent this year from 4.4 percent in 2022.
Vandana Hari, founder and CEO of Vanda Insights in Singapore, said her focus, however, is on the U.S. and European economies, where she sees headwinds blowing.
“Good data will be bad data because it will raise expectations of further Fed tightening. And bad data may also be bad data, as happened last week, being seen as confirmation that the high lending rates are slowing down the economy,” she said.
The Atlanta Fed’s GDPNow forecast shows a 1.5 percent expansion for the first quarter, down 0.2 percent from its previous guess. The economy expanded by 2.6 percent over the three-month period ending in December, and Hari said she’ll be combing over OPEC’s monthly market report on Thursday for any downward revisions in the economic forecasts.
OPEC economists last month said they expected the global economy to expand by 2.6 percent this year.
Bill Weatherburn at Capital Economics in London adds that much of the data out this week could encourage the U.S. Fed to avoid any more rate hikes, as job losses mount and new openings sink to a two-year low.
“U.S. inflation data Wednesday should show price pressures are easing, and if that’s the case interest rates may not have to rise as far, giving a boost to crude oil prices,” he said.
Higher interest rates are designed to cool the economy by discouraging spending on big-ticket items such as vehicles. Should interest rates stay level, it could recharge demand somewhat and push crude oil prices closer to $100 per barrel.
Several analysts, meanwhile, said recent developments in Iraq could keep a short-term lid on crude prices. Oil exports from the Kurdish north to the Turkish seaport at Ceyhan on the Mediterranean were halted amid disputes with Baghdad, though both sides shook hands last week.
Colby Connelly, a senior analyst at Energy Intelligence, said it’s unclear when exports will resume, but it would bring another 450,000 barrels per day back to the market when they do.
The second quarter is upon us, meanwhile, and market analysts at New York brokerage OANDA said to pay attention to Friday’s earnings reports from the likes of JPMorgan and Wells Fargo to see how the finance sector weathered the recent storm.
