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OPEC+’s surprise oil-production cut sent shock waves through financial markets and pushed crude prices up by the most in a year. Now that the dust has started to settle, one question looms large: Will that price rally stick, or fade away?
Banks from Goldman Sachs Group Inc. to RBC Capital Markets LLC raised their oil-price forecasts immediately after the OPEC+ cut. Yet, many traders still believe a souring economic outlook will block the group’s actions from pushing prices higher. Demand indicators are also starting to flash warning signs.
It could end up being the ultimate test of what matters more to the market: tighter supplies, or the lackluster demand picture. That will likely bring more uncertainty over the direction of prices — a complicated development for the Federal Reserve and the world’s central bankers in their ongoing battle against inflation.
“It’s a very hard market to trade right now,” said Livia Gallarati, a senior analyst at Energy Aspects. “If you’re a trader, you are pulled between what’s happening at a macroeconomic level and what’s happening fundamentally. It’s two different directions.”
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