Having gained 30 percent since the start of the year, international crude oil prices showed the first signs of weakening, as the supply situation has once again created doubts and could potentially apply brakes on the ongoing rebalancing exercise by the major producers. Crude oil, after gaining for six straight weeks, has stayed bearish, as the US crude stockpiles rose by 1.9 million barrels last week, four weeks in a row.

This is despite the fact that the infighting in Libya has given birth to fresh concerns of assured supply from the region. The Iranian exports are also facing stiff challenge due to sanctions, whereas the Venezuelan output has shown no signs of recovery – it ahs rather nosedived to multiyear lows. But most of it had long been factored into the oil price rally that started in December 2018.

Add to that, the latest forecasts for global economic growth, which do not read a rosy picture, particularly in leading oil consumption economies – and the bears are just warming up. The global demand growth for crude oil is estimated to slow down to less than 1 percent – the lowest in six years – and that could be a real dampener, especially if the US keeps pumping at the current pace.

The heaviest premium although, is attached to the fate of Opec Plus, which has so far shown immense compliance in the bid to control prices by substantially reducing the output. Saudi Arabia, being the leading producer, has led from the front, slashing the output to multiyear low. It would be too early to suggest that Saudi Arabia would let go off the production freeze deal anytime soon – especially as it readies for the Aramco deal.

But the other vital player in the equation, the non-Opec member Russia may have other ambitions. Russian Finance Minister created quite a stir earlier this week, hinting that Russia may well pull out of the deal and not be part of extension come June 2019. And if that materializes, Saudi Arabia would also feel the heat to be part of the race to catch up with the market share race with both the US and Russia.

Russia’s compliance has been exemplary so far, in the production freeze deal, but increasing pressure from with Russia suggests, it would be difficult to hold it for another round. Even if Russia doe send up agreeing to continuation of production cut, there is enough time between now and the next Opec meeting in June to keep the risk premium and volatility on the higher side, and that could take the oil prices down considerably.