Summer Could be Constructive for Oil: JP Morgan

The summer may look constructive for oil were Russia to fulfil its pledged export cut, or the voluntary reductions are extended beyond June, JP Morgan said in a note.

• “While we believe Russia’s commitment to cut production is genuine, we are less sure about the country’s pledge to reduce exports, given its track record,” JP Morgan said.
• The note added that the 3.8m b/d of spare capacity at a record time of demand will make any further large-scale supply cuts difficult to achieve.
• “Our view on demand this year suggests a healthy market balance that can absorb higher OPEC production.”
• JP Morgan expects a 0.5m b/d supply increase from July, evenly split between Saudi Arabia and Russia. This will likely be decided at the next OPEC+ ministers’ meeting June 1.
• JP Morgan also revised their supply-demand balance in Q2 to a 0.4m b/d deficit, compared to the previous 0.1m b/d surplus.
• The bank kept its price forecasts stable at $88-$90/b for Brent.