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As international oil price posted first weekly loss in eight weeks, murmurs of Brent and WTI having peaked have rebounded. Well, not so fast! Not much has changed in the last two month in terms of fundamentals of the oil market, other than Opec Plus' decision to unwind production cuts by a larger increase of 0.65 million barrels – 50 percent higher than the phased increase of the previous three months.

The market continues to be dominated by supply side fears, as the Russia-Ukraine war appears nowhere close to an abrupt end. Most of Europe is still firming up plans to leave 90 percent of Russian oil out of the system by the year end. Us inventories have declined for three straight weeks, despite record high gasoline prices at the pump.

The Biden administration is likely to announce tax holiday on petroleum consumption for three months. This is likely to keep the commuters happy and the tanks filled, during summer travel. The weather gets warmer in the Middle East and Asia, and the demand for oil products is once again back with a bang. China is gradually returning to near full reopening. The supply growth is surely lacking demand growth and is likely to continue for at least another three to four months, before winters kick in across high demand geographies.

Supply anxiety has refused to die down after the USA is in talks with Canada and other allies to restrict Russia’s energy earnings by imposing a fresh price cap. There have been fresh attempts at further sanctioning oil shipments from Russia, through slapping bans on essential equipment needed to keep the oil production going.

Russia, on the other hand, appears confident of its ability to keep the production going without much hiccups, as it overtook Saudi Arabia for the first time, as China’s biggest oil supplier last month. That said, the US and European Union are confident of putting a sizeable dent to what now appears a seemingly easy passage for Russian oil to big buyers.

On the other hand, the fears of a global recession have only grown since the Fed hike. And that scenario should be bearish for oil. But currently, there are no takers yet. The likes of JP Morgan and Goldman have not blinked yet. Then again, a significant reversal of forecast in a span of one month is nothing that the big houses have not done before. It is 50-50 out there in the oil market.

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