OPEC+ likely to extend production cuts in June, Goldman Sachs says (NYSEARCA:USO)

Crude oil futures added modestly to the previous session’s gains on Thursday that followed an unexpected drawdown in U.S. stockpiles.

The 1.4M-barrel decline in U.S. crude inventories in the week ended May 3 “supported the market after a month of price corrections as the market reacted to geopolitical developments,” Tickmill managing principal Joseph Dahrieh said, as reported by Marketwatch.

Oil prices also were supported by global demand optimism after China’s customs data showed the country’s oil imports rose by a solid 5.5% in April from a year earlier.

However, concerns remain about U.S. gasoline demand as the summer driving season approaches, with data showing domestic gasoline stocks growing by 915K barrels.

“A normal or average gasoline supply level may not appear bearish at first glance but the fact that demand continues to deteriorate suggests a more than ample supply heading into the heavy driving season,” Ritterbusch says, according to Dow Jones.

Front-month Nymex crude (CL1:COM) for June delivery ended +0.3% to $79.26/bbl, and front-month July Brent crude (CO1:COM) also closed +0.3% to $83.88/bbl, the highest settlement value for both benchmarks since April 30.

ETFs: (NYSEARCA:USO), (BNO), (UCO), (SCO), (USL), (DBO), (DRIP), (GUSH), (NRGU), (USOI)

Goldman Sachs says it expects OPEC+ will extend production cuts in June, and no longer sees the group announcing a partial unwind of voluntary cuts.

Goldman notes inventories have recently surprised to the upside, and data on recent compliance with output cuts suggests extending Saudi Arabia’s 1M bbl/day reduction as part of a 2.2M bbl/day package would support the country’s short-term oil profits.

The bank still forecasts Brent crude staying in the $75-$90/bbl range in most scenarios, and sees prices averaging $82/bbl in 2025.