By Giulia Petroni


Here is a look at what happened in oil markets in the week of June 10-14 and what the focus will be in the days to come.


OVERVIEW: Oil prices are on track for weekly gains, with both Brent crude and WTI up almost 4% on the week. Futures regained ground after plunging to four-month lows last week on news that the Organization of the Petroleum Exporting Countries and its allies aim to gradually bring some barrels back into the market later this year. But prospects of tighter supply due to the extension of OPEC+ voluntary cuts until the end of September and summer travel demand are providing support to prices. The international oil benchmark currently trades at around $82 a barrel, while the U.S. oil gauge is around $78 a barrel.


MACRO: The latest U.S. inflation reading suggested price pressures moderated in May. The consumer-price index rose 3.3% from a year ago and held flat on month, while core prices rose 3.4% on year against estimates of a 3.5% increase.

Yet, the Federal Reserve left interest rates unchanged and projected only one cut this year at the end of its two-day meeting on Wednesday. The U.S. central bank doesn't have the confidence to cut rates yet, but noted a modest progress toward the 2% inflation target. The next meeting is scheduled for July 30-31.

According to analysts, further price increases are capped by uncertainties over the economic outlook of major economies and prospects of higher-for-longer rates in the U.S., which tend to be bullish for oil as higher borrowing costs typically dampen demand for the commodity.


SUPPLY AND DEMAND: It was a fairly busy week, with the three main industry bodies releasing their periodical reports on oil markets.

The International Energy Agency cut its forecast for global oil-demand growth for this year and next, warning global markets are expected to face a major surplus by the end of this decade as demand growth slows and supply surges. OPEC instead reaffirmed its bullish estimates for demand growth and called the IEA's forecast "dangerous" for energy volatility.

The U.S. Energy Information Administration lowered its 2024 estimates for benchmark crude prices by around 4%, but raised its forecast for growth in global oil consumption by around 200,000 barrels a day to 1.1 million barrels a day. Weekly data from the EIA was bearish for oil, as it showed a surprise build in U.S. crude inventories, with stocks rising 3.7 million barrels last week against expectations of a 1.2-million-barrel fall, mainly due to stronger oil imports and weaker exports.


GEOPOLITICAL RISKS: Ceasefire talks are back in focus this week, but Israel and Hamas remain divided despite heavy pressures from Arab mediators and the U.S. Meanwhile, tensions in the region remain high after the Iranian-backed military group Hezbollah launched hundreds of rockets and drones at northern Israel; while a cargo ship in the Gulf of Aden was struck by two cruise missiles fired by the Houthis in Yemen.

The geopolitical backdrop is currently challenging for oil markets and could threaten global supplies. But according to analysts, the risk premium seems to be waning over time as there hasn't been a material impact on supplies yet and the market seems reassured by the historically high level of spare capacity held by OPEC.


WHAT'S AHEAD: Next week, traders will be watching the EIA's weekly report on U.S. inventories for more cues on demand trends in the top consumer, as well as data on crude oil processing in China.

"The figures for crude oil processing in China, which were already slightly below the previous year's level in the first four months, are likely to put a damper on sentiment," Commerzbank Research analysts say in a note. "The signs for May are rather subdued: Although crude oil imports in May were slightly higher than in the previous month, they remained at a rather low level. In addition, processing margins in Asian refineries fell to a three-year low in May, according to the IEA, which reduces the incentive to expand processing."

China's statistics bureau is set to release data for retail sales, industrial production and fixed-asset investment for May on Monday.


Write to Giulia Petroni at giulia.petroni@wsj.com


(END) Dow Jones Newswires

06-14-24 1242ET