Oil prices surged for the second consecutive day on Thursday, with WTI crude rising above $75 per barrel, rebounding sharply from a four-month low earlier this week. This increase followed OPEC+ ministers' staunch defense of their latest production policy decision, asserting that the market will eventually recognize the correctness of their actions. Saudi officials warned that planned production changes by OPEC+ could be reversed, while Russian representatives stated they would gradually compensate for exceeding their OPEC+ quotas.
At the start of the week, oil prices plummeted following the weekend decision by OPEC+ to phase out additional production cuts. During Sunday's OPEC+ ministerial meeting, an agreement was reached to extend the production cuts but gradually lift the additional cuts for eight member countries starting from the end of September.
The OPEC+ decision to increase supply has heightened market concerns over global demand and strong supply outside OPEC. Additionally, the diminishing impact of geopolitical tensions on oil supply has exacerbated the price drop. Following the meeting, Goldman Sachs analysts noted that the outcome was bearish for oil prices.
In response to the market's negative reaction, OPEC+ ministers have reiterated their confidence in their production policy, asserting that the market will come to understand the wisdom of their latest decisions. They emphasized that the organization retains the option to pause or reverse production changes if necessary.
Saudi Energy Minister Abdulaziz bin Salman warned that OPEC+ could reverse its planned production changes, emphasizing that OPEC+ has not shifted from being a price regulator to a market share competitor. He also criticized unnamed bank analysts and media for their interpretations of the recent OPEC+ agreement.
OPEC Secretary-General Haitham al-Ghais expressed confusion over the criticism of the agreement. "For some time, we have heard and seen calls for a clear roadmap on production adjustments, whether phased out or reduced. When we provide this clarity, it becomes confusing and negative. Sometimes it is really hard to understand."
UAE Energy Minister Suhail al-Mazrouei reaffirmed the UAE's commitment to OPEC+ and dismissed media speculation, stating, "Regardless of what you hear in the media."
Russian Deputy Prime Minister Alexander Novak defended the June 2 decision, stating, "The decisions were very appropriate, guiding us in the right direction. They show us the commitments needed in the energy market and what will happen in the third quarter and until the end of 2025. We will be able to respond promptly to market developments and emerging uncertainties."
Novak also indicated that Russia would gradually compensate for its crude oil production exceeding OPEC+ quotas, with specific compensation volumes to be announced in a week. In May, Russia nearly fully complied with the OPEC+ production cut agreement, aiming to reduce output to the agreed level of 9 million barrels per day by the end of June.
Novak confirmed that Chinese demand aligns with expectations, validating OPEC+'s plan to increase production gradually from October. Russia projects global oil demand growth of about 1.5 to 2 million barrels per day this year and about 1.5 million barrels per day next year. By the end of this year, oil prices are expected to range between $80 and $85 per barrel.
Technical factors also contributed to the recent oil price surge. The 14-day Relative Strength Index (RSI) indicated that oil had entered oversold territory, suggesting excessive selling.
As of Thursday's close, WTI July crude futures rose by $1.48, or approximately 2.00%, to $75.55 per barrel. Brent August crude futures increased by $1.46, or about 1.86%, to $79.87 per barrel. Earlier this week, Brent crude fell below $80 for the first time since February.
On the same day, the European Central Bank projected oil prices at $83.8 per barrel for 2024, $78 per barrel for 2025, and $74.5 per barrel for 2026.
Market observers noted that Saudi Aramco's decision to cut oil prices for Asia next month, the first reduction since February, could signal bearish market sentiments. Additionally, EIA data released on Wednesday showed an increase in U.S. commercial crude oil inventories.
