The Aug Brent Futures flat price has seen a stronger afternoon following the muted activity this morning. Price action initially traded in a range between $81.40/bbl and $81.70/bbl from 12:00 BST to 15:00 BST. Yet, we saw a rally from $81.40/bbl to $82.20 as of 17:40 BST (time of writing). As per OPEC’s monthly report, their oil demand annual growth forecast for 2024 and 2025 remained unchanged at a rise of 2.25mbpd and 1.85mbpd, respectively. According to OPEC, steady global economic growth will allow for achieving the forecasted demand growth above, assuming the service sector “maintains a stable momentum.” They also revised-up their estimate for total demand for Q2’24 by 50 kb/d alongside a cut of the same size to their Q1’24 estimate to 103.51mbpd. In contrast, in its May oil market report, the IEA expects a far lower demand growth figure for the year. The market is keenly awaiting the outcome of Fed FOMC meeting that will conclude tomorrow. The outcome will be preceded by the release of the CPI index for May, which together with labour market data released Friday, will likely shape the direction of the median of the Fed’s dot plot, or where the FOMC members see the Fed policy rate at the end of 2024. In previous plots, the median implied 3 rate cuts. This time around, the consensus forecast is looking for number of cuts implied by the dot to be reduced to 2. In the meantime, the Fed is in our view to budge, and will continue to target a Fed funds rate between 5.25-5.50%. At the time of writing, the Brent Futures front month and 6-month spreads are $0.36/bbl and $2.56/bbl, respectively.
