Crude Oil Price Retreats on OPEC+ Perspective and a Firm US Dollar. Where to for WTI?

The abrupt decline in crude oil prices is attributed to the anticipation that OPEC+ will adhere to its production objective and a significant increase in the value of the US Dollar. russian Deputy Prime Minister Novak has indicated that the forthcoming meeting of the Organization of Petroleum Exporting Countries (OPEC) on June 4th will not result in modifications to its production target.

During an interview with the Russian newspaper Izvestiya, the individual expressed their belief that there will be no modifications made to the current production objectives at the upcoming conference in Vienna.

The comments made by the Minister of Energy of Saudi Arabia, Abdulaziz bin Salman, on Wednesday issued a warning to speculators. In contrast, the remarks made by another individual were significantly different. The short-term effects of this warning were evident in the crude prices, which increased before declining during the Asian trading session.

The oil market received a boost from the possibility of supply constraints caused by wildfires that ravaged the provinces of Alberta, British Columbia, and Saskatchewan in Canada. While the situation has improved to some extent, it still poses a significant concern.

This week, the US Dollar has experienced a strong surge. Despite this, crude oil prices have managed to increase, which is somewhat unusual. The currency markets are currently analyzing the potential consequences of a possible US debt ceiling agreement and the continuous growth of Treasury yields.

The yields on Treasury securities have increased across the various maturity levels. However, the current concern is centered around the 1-year note, which is only a few basis points shy of reaching a 23-year high of approximately 5.30%.

The prospects for crude oil appear uncertain until global economic growth stabilizes. Although there have been positive economic indicators in the United States, China has yet to recover from the pandemic-related restrictions. As such, it appears that China may face challenges in stimulating economic growth.

The RBOB crack spread, which serves as an indicator of the profitability of refiners and measures gasoline prices relative to crude oil prices, has shown a recent increase. This development has the potential to provide some backing to crude oil prices.

RBOB, an acronym for reformulated blendstock for oxygenate blending, denotes a gasoline grade that can be traded in the market. The surge in profits among refiners may potentially stimulate a heightened demand for crude products.

Currently, there appears to be a level of market equilibrium as indicated by the minimal disparity in cost between the first two WTI futures contracts.