UBS Expects Oil Markets to Tighten H2

UBS expects the oil market to be undersupplied in the second half of the year according to its head of commodities Dominic Schnider in an interview with CNBC.

• He said everyone thought the market would be tighter in the first quarter – but warmer weather and Russian supply played a key part in keeping prices down.
• Markets are also unsure if OPEC+ is going to deliver its voluntary cuts, but he said the markets have already seen exports from OPEC+ coming down. He added he expects Russia to adhere to the OPEC+ agreement. That brings down over 1.5mn bbls on the supply side. As a result, UBS expects a draw in global crude inventories in the second of the year.
• The question is how much demand plays out and how major economies are impacted by recessions, Schnider said.
• OPEC+ cuts have only just started in May so now we need to see what happens with inventories. If demand turns out to be much weaker - then OPEC will need to come to the table and reduce output once more but they are here to try and give a floor to prices according to Schnider. OPEC has the ability to manage prices in the send half of the year he added.