Despite a last minute recovery, Brent fell $6.44/bbl last week with the benchmark crude nearly ending on June 5 sub-$60/bbl. WTI’s average fell $4.01/bbl last week and also some recovery at the end of the week despite a large crude and refined products build.

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For the week ahead we expect Brent to average $61/bbl as prices pause and markets reevaluate economic expectations. The Brent-WTI differential will remain wide as fears of an economic slowdown and/or production increase are especially weighted towards U.S. markets.

Oil ministers from Russia and Saudi Arabia have been meeting on the sidelines of the St. Petersburg International Forum. We expect to see statements reaffirming a commitment to stable oil markets. However, the Russian government is increasingly facing pressure from internal firms to end the production agreement and raise production. Russia’s April compliance was 80% according to the latest IEA report with many of the other OPEC+ signatories achieving compliance above 100%. Russia’s withdrawal would likely have a more immediate impact on optics than overall fundamentals. However, the optics would be very negative, and would certainly force Saudi Arabia to shoulder an even greater share of the burden, beyond the 256% compliance reported in April.

Friday saw the most lackluster employment report in months, and stoked fears that the economy is swiftly slowing. Retail sales and factory orders also slowed in April, showing that consumers and business alike are becoming more cautious. Over the weekend it was announced that tariffs against Mexico had been averted, removing at least one element of uncertainty although the trade dispute with China continues to drag on.

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Geopolitical Unrest: Neutral
Global Economy: Neutral
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Oil Supply: Negative
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Oil Demand: Neutral
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