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According to analysts from TD Securities, crude oil prices could correct lower in the short-term. They see weakness in oil markets may be temporary, as the OPEC+ joint ministerial monitoring committee (JMMC) will meet monthly until December to review the market, and may extend and augment the current cuts, depending on market dynamics.

Key Quotes: 

“With OPEC, Russia and other key producers again deciding to extend the record 9.6 million b/d of oil production cuts until the end of July and global oil demand starting to return as major economies reopen, by looking on the surface one may expect the rally which took WTI crude into $40/bbl territory from the lowest levels on record to continue. However, prices fell after Saudi Arabia said it wouldn’t continue its additional, deeper output curbs after June. Market concerns that US shale producers and two top Libyan oilfields, after five-month halt, may start opening spigots again also played a role in forcing crude lower in the full sessions immediately following the OPEC+ weekend deal.”

“Given the market priced a best case scenario, risks are emerging due to the less-than-stellar supply projections. With refinery runs in the US struggling to pick up despite the modest demand-side normalization, the projected 2 billion bbls inventory accumulation during H2-20 may take longer-than-expected to unwind.”

“While cell-phone tracking data suggests that gasoline demand has picked up substantially, the horrible heating oil cracks provide little economic incentive for higher runs. As risks emerge, WTI may again drift down to just under $35/bbl and Brent to $38.50/bbl.”

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