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Crude oil: OPEC+ production increase in line with deal

We attribute the decision to stick to the plan and not increase pro-duction faster to several factors. Mobility restrictions in China are weighing on oil demand and likely supported the cautious stance. Russian crude exports in April increased by more than 500kbpd versus March, keeping the oil market well supplied for now. And lastly, dwindling spare capacity within the group means that a faster production increase would reduce that spare capacity even more.

Market participants will be tracking Chinese mobility restrictions closely, along with the sixth round of Russian sanctions from the European Union, in our view. Trading houses are planning to reduce crude and oil product purchases from Russia’s state-controlled oil companies as early as 15 May, as the fourth package of sanctions of the European Union (implemented also by Switzerland) comes into force. All these factors point to a tightening oil market this summer, with demand outside China holding up. With limited spare capacity and low oil inventories, we reiterate our positive price outlook and continue to advise risk-taking investors to add long positions in longer-dated oil contracts in Brent, or sell Brent’s downside price risks.
Source: UBS

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