Oil futures: Crude recovers from lows as OPEC+ switches meeting to Saudi

Quantum Commodity Intelligence – Crude oil futures in Friday remained under pressure for much of the session, although reports that the OPEC meeting was being switched, at least in part, to a ministerial gathering in Saudi Arabia helped to moderate the day's losses. 

Aug24 ICE Brent futures were trading at $81.38/b (1700 GMT), compared to Thursday's settle of $81.88/b, while the Jul24 contract last traded $81.57/b heading into expiry and having briefly topped $85/b midweek.

At the same time Jul24 NYMEX WTI was trading at $77.33/b, versus the day's low of $76.67/b Thursday's settle of $77.91/b.

Benchmarks were still heading for small weekly losses as the selloff came amid growing concerns over demand growth, while the US is running out of options for multiple interest rate cuts this year. 

Weak refining margins have also weighed on crude prices, which have been a feature throughout May and prompting speculation that refiners will reduce summer throughputs.  

Underlining the prompt weakness, the Jul24/Aug24 Brent spread tipped into contango for much of the session although in part linked to expiry volatility, while forward spreads have also narrowed.

Last Friday, Aug24 Brent futures closed at $81.84/b, while Jul24 WTI settled at $77.72/b, as both benchmarks remained close to the low end of the three-month trading range.

OPEC+

This week's price retreat has all but ended any prospect of OPEC+ starting the process of unwinding cuts in Q3, while analysts have indicated the group could also discuss extending some of the cuts due to expire at the end of 2024.

But breaking news late Friday that OPEC+ will now hold its 2 June ministerial meeting in the Saudi capital helped steady prices moderate the losses, with Aug24 Brent recovering from Friday's low of $80.75/b.

EIA data revealing that US commercial crude stocks fell by 4.2 million barrels did little to support prices, with markets instead focusing on the build in gasoline inventories.

Gasoline stocks swelled 2 million barrels or 0.9% to 228.8 million barrels in the week to 24 May, the steepest weekly build since January and puts US gasoline inventories at their highest since early April and 6% above the same time last year.

Friday's core PCE US inflation number, which is closely watch by the Fed, was up 2.8% and largely in line with forecasts.

Figures also released Friday showed Eurozone headline inflation ticked up from 2.4 to 2.6% in May, while core inflation increased from 2.7 to 2.9%. Analysts still expect the ECB to cut rates next week, but higher inflation will limit prospects for further cuts.

Meanwhile, China's official manufacturing purchasing managers' index (PMI) tumbled to 49.5 in May from 50.4 in April, highlighting the uneven recovery in the world's second largest economy and industrial powerhouse.