Global oil market likely ‘extremely tight’ in this year’s H2, Citadel says (NYSEARCA:USO)

Crude oil futures fell Monday but settled above the session’s lowest levels, as Israel said it would remove some troops from southern Gaza to prepare for future operations.

Israel and Hamas opened a fresh round of Gaza ceasefire talks on Sunday, but media reports differed on the amount of progress that was made.

Israel’s pullback decision “has reduced somewhat the geopolitical risk premium,” UBS analyst Giovanni Staunovo said, adding that oil prices also were weighed by expectations that U.S. crude oil stocks likely rose last week.

Crude futures fell for the first time after six straight daily gains, with the front-month Nymex contract (CL1:COM) for May delivery ending -0.5% to $86.43/bbl, after trading as low as $84.69, and front-month June Brent crude (CO1:COM) closed -0.8% to $90.38/bbl.

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

Global oil markets likely will be “extremely tight” in this year’s H2, with prices rising to a level that eventually will constrain demand if OPEC+ does not bring back more supply, Citadel’s Sebastian Barrack told the Financial Times Commodities Global Summit in Switzerland.

OPEC+ has “definitely regained control” of the market and can define where prices will go over the next 12 months, Barrack said.

But Goldman Sachs sees crude prices staying below $100/bbl this year on expectations of solid demand and no additional hits to supply from geopolitical escalations.

Goldman forecasts demand growth of 1.5M bbl/day – above estimates from the International Energy Agency – and says it expects OPEC+ to raise production by 1.2M bbl/day from July through November.

“We assume that OPEC+ won’t push oil prices to extreme levels because the 2022 energy crisis showed that extreme prices destroy long-term residual demand for OPEC barrels by boosting non-OPEC supply and capex in alternatives to oil,” the bank wrote.