Oil: “Barrel prices should stabilize, but watch out for Russia”

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Oil prices suffered from signs of US growth fatigue and a (relative) ebb of geopolitical concerns. However, the price of Brent should stabilize, according to our columnist Alain Corbani, head of raw materials at Montbleu Finance and manager of the Global Gold and Precious fund, who, however, mentions a possible “Russian prankster”.

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– Oil

Oil gasps. Optimism from the first quarter of 2024, which drove the price of a barrel of oil (benchmark Brent) from $75 to $90, has given way since April (downward) to the adjustment of growth expectations and geopolitical tensions. The result: a 7.5% drop in the price of oil during the month. From a growth rate of 3.4% in the fourth quarter of 2023 (above consensus), the economy grew by only 1.6% in the first quarter of 2024, beating all expectations (even the most pessimistic).

As a direct result of this economic slowdown, US oil consumption fell by more than 4% (end of April publication), leading to an increase in oil inventories (excluding strategic reserves) of 7.3 million barrels. Fed Chairman Jerome Powell’s comments hit the nail on the head last Wednesday when he clarified that the Fed would be “cautious when approaching the decision to cut rates” and that he thought “other countries could have done it earlier.” As a reminder, the price of a barrel of Brent has a historical negative correlation of almost 25% with the US currency.

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Oil: Low prices, OPEC+ market ‘not really impressed’.

Renewed concerns over US sanctions on oil exports from Venezuela and Iran

The high fears (we never subscribed to them) of tougher US sanctions on Venezuelan or Iranian oil exports – in the run-up to the US presidential election – seem to be making sense (only 15% of Venezuelan oil exports, according to Rystad Energy). And the reassuring messages sent by the Middle East warring parties (Israel and Iran) signifying their desire to limit the Israeli-Palestinian conflict in its current geography/configuration, or the diplomatic agreement signed in March 2023 between Iran and Saudi Arabia under the auspices of China (which weathered the crisis) were all signals favoring the voltage limiting scenario.

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Meanwhile, NYMEX net speculative positions returned to summer 2022 levels with long speculative positions (ie, bullish bets on oil prices, editor’s note) slightly constructive (optimistic on oil price growth, editor’s note). China’s growth of over 5% and continued OPEC+ discipline (which still wants to cut production to support prices) while US production is flat for two months and we’re heading into a season of big exits (driving season).

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Russia’s oil revenues are highest since 2022

Oil is expected to stabilize, but Russia may seek to influence the US election

The next OPEC+ meeting is scheduled for June 1. Several voices have already indicated that if demand for oil weakens, the voluntary curtailment of oil production will be extended until the end of June. Taken together, all these elements confirm our 2024 central scenario of oil barrel prices stabilizing in a narrow range close to current prices, although we are aware of the possibility of a “joker” intervention, which is politically very interested in influencing the November 2024 US election.

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