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Firm demand and large inventory draws prompt traders to look past OPEC+ increases. Bart Melek, Head of Commodity Strategy at TD Securities, just expects limited upside for the WTI as it is already trading at $63.

Little reason to aggressively build new longs

“Petroleum product demand strength amid a very robust US vaccination program, sharply lower-than-expected inventories along with recent demand projection increases by OPEC and the IEA have convinced traders that the pending OPEC+ production increases over the next three months will not prevent a tighter market environment this year.”  

“After an aggressive reduction of long exposure last week, it is likely that money managers are once again revisiting their interest in longs and are also continuing to cover shorts.”

“We expect only limited additional upside and range-bound trading over the next months, in line with our $63/b projection for Q2. Markets should not become overly tight, as OPEC, Russia and other key producers have plenty of crude to deploy to satisfy the pending demand recovery, thereby preventing crude from rocketing higher.”