2019 has delivered for the most part a one-way move higher for oil prices as OPEC + production cuts have successfully stabilized prices. WTI crude has rallied over 40% this year and prices could be ripe for a massive pullback despite uncertainty to major geopolitical risks (Libyan impending war, Mexican crude about to collapse, and Venezuelan production disruptions).
Many expected a rebound in eurozone’s private sector activity but they were disappointed this morning. The global demand picture remains mixed but so far signs are looking optimistic for a pickup in the second half of the year with a China-US trade deal expected by early June at the latest.
OPEC punted their extraordinary meeting to see what the US will do regarding Venezuela and Iran sanctions, but that could have been a mistake, as Russian support for continued cuts could be waning.
The big risk to lower oil prices remains the US, whether it’s Trump’s tactics to talk down oil by threatening using their reserves or the continued rise in US production. Rigs are building up again and by summer time we could see start to see many question OPECs relevance again.