Oil prices recover from sell-off as OPEC sticks to demand and steady economic growth forecasts

Crude oil futures held to gains Tuesday as OPEC stuck to its demand forecasts, counting on steady economic growth this year.

Oil prices rallied more than 2% on Monday with U.S. crude oil booking its best day since Feb. 8. The market has recovered the losses from last week, after selling off to four-month lows in the wake of the decision by OPEC+ to increase crude production in October.

Here are Tuesday’s closing energy prices:

• West Texas Intermediate July contract: $77.90 per barrel, up 16 cents or 0.21%. Year to date, U.S. oil has gained 8.7%.
• Brent August contract: $81.92 per barrel, up 29 cents, or 0.36%. Year to date, the global benchmark is ahead 6.3%.
• RBOB Gasoline July contract: $2.40 per gallon, little changed. Year to date, gasoline is up 14.5%.
• Natural Gas July contract: $3.12 per thousand cubic feet, up 7.67%. Year to date, gas has advanced 24%.

OPEC is projecting oil demand growth of 2.2 million barrels per day for 2024 and 1.8 million bpd in 2025, according to the group’s monthly report. The oil producers see global economic growth of 2.8% this year and 2.9% in 2025.

OPEC expects the services sector to maintain stable momentum and drive economic growth in the second half of the year, “particularly supported by travel and tourism, with a consequent positive impact on oil demand.”

John Evans, analyst at oil broker PVM, said traders appeared to be “buying the dip” after many investors abandoned their long positions in the wake of the OPEC+ production decision.

“After oil prices experienced a bearish confluence of events, shook out much length and toyed with being oversold, there is almost an inevitability in the rally back to current levels,” Evans said in a note.

Money managers cut their net long position in Brent by 69% week over week to the lowest level since 2014 in the wake of the OPEC+ decision, according to JPMorgan.

Despite the bearish sentiment last week, Goldman Sachs forecast the market will enter into a deficit on summer fuel demand that will push Brent back up to $86 per barrel in the third quarter.

Phil Flynn, senior market analyst at the Price Futures Group, said “the market seemed to awaken” to the fact that the world is “sleepwalking into a global oil supply deficit” given OPEC’s production cuts remain in place for now and rig counts are falling in the U.S.

Traders are looking ahead to the conclusion of the Federal Reserve meeting and U.S. inflation data for May on Wednesday. The International Energy Agency will release its monthly oil market report the same day.