Crude Oil faces CTA headwinds as OPEC+ tests market resilience - TDS

Crude markets only have a very narrow path towards higher prices. In the imminent term, CTA selling activity will weigh on price action into the OPEC meeting. This selling activity is likely to be less significant than that which we expect in gold markets, but should weigh on prices nonetheless, TDS' Senior Commodity Strategist Daniel Ghali notes.

Crude prices vulnerable despite strong demand as supply returns

"Ultimately, crude markets will struggle to absorb additional barrels from OPEC+ over the coming months, which we argue reflects a strategic pivot in policy driven by an attempt to a) test US shale production; b) improve compliance; and most importantly c) regain the supply-side leverage required to combat lower Oil prices in the event of a slowdown in demand."

"Energy demand remains resilient, US shale production is peaking, Venezuelan export licenses have expired, and geopolitical risks surrounding Iran remain elevated - all of which will likely act as a shock absorber to lower prices."

"Still, OPEC+ was ultimately forced into this strategic pivot, and remains emboldened to bring these barrels back during seasonally favorable months; markets will struggle to absorb these barrels, particularly following the summer months. The path to sustainably higher prices remains extremely narrow."