Oil fundamentals and global macro are pulling in opposite directions, leaving the market undecided.
Crude has benefited from Saudi warnings along with a huge US inventory draw this week but it's struggling to make real headway because much of the market doesn't want to buy ahead of a possible recession.
That's setting up a continued period of uncertainty that will ultimately lead to a violent break higher or lower.
A break lower would include a combination of a harsh global recession that's accompanied by a breakdown in OPEC discipline and perhaps an end to the Ukraine war and Russian sanctions.
A break higher would include a soft landing along with continued discipline from OPEC+, beyond the plan to keep output steady through year end. It could also include the US refilling the SPR, though you'd have to imagine that would be pulled back if oil rose to $90 (especially in an election year). There's also an argument that the status quo should result in higher prices with OPEC just beginning to cut supply this month as seasonal demand rises and with a heavy schedule of summer turnarounds. Specs are also positioned extremely bearishly.
Today, crude managed to gain $1.43 on strong buying into settlement. That's a good sign but the bulls pulled out a late victory from the jaws of defeat. After the huge draw in the US inventory report -- the largest since August 2020 -- oil barely budged higher and then sank back to unchanged on the day.
