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Crude oil futures fell on Monday, but stood above their lowest levels of the session, as Israel said it would remove some troops from southern Gaza to prepare for future operations.
Israel and Hamas have opened a new round of ceasefire talks in Gaza Sunday, but media reports differed on how much progress had been made.
Israel’s withdrawal decision “has reduced the geopolitical risk premium somewhat,” UBS analyst Giovanni Staunovo said, adding that oil prices were also weighed by expectations that U.S. crude inventories were likely to increased last week.
Crude oil futures fell for the first time after six straight daily gains, with the front-month Nymex contract (CL1:COM) for May delivery ending -0.5% at $86.43 a barrel, after trading as low as $84.69, and front-month June Brent crude (CO1:COM) closed -0.8% at $90.38/barrel.
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Global oil markets are likely to be “extremely tight” in the second half of this year, with prices rising to a level that will ultimately constrain demand if OPEC+ fails to bring back more supply, Citadel’s Sebastian Barrack said at Financial Times Global Commodity Summit in Switzerland.
OPEC+ has “definitely regained control” of the market and can define where prices will go over the next 12 months, Barrack said.
But Goldman Sachs expects crude prices to stay below $100 a barrel this year on expectations of solid demand and no further supply hits from geopolitical escalation.
Goldman forecasts demand growth of 1.5 million bbl/d – above International Energy Agency estimates – and says it expects OPEC+ to increase production by 1.2 million bbl/d day from July to November.
“We assume that OPEC+ will not push oil prices to extreme levels because the 2022 energy crisis has shown that extreme prices destroy long-term residual demand for OPEC barrels by increasing supply and non-OPEC capital spending into alternatives to oil,” the bank wrote.