Another OPEC+ shocker could jolt Brent towards $80

Oil prices have started off June on the front foot, rising in tandem with the risk-on moves across global financial markets.

Brent was able to bounce off the $71/bbl handle, to test its 21-day simple moving average (SMA) for immediate resistance at the time of writing.

Oil prices were helped on by hopes that the Fed will pause its rate hikes this month, also noting that the risk of a US default has now been nullified. 

Such optimism has even helped the commodity shrug off the recent reported rise in US stockpiles.

 

However, major risk events lie ahead for oil markets in the days ahead:

Friday,, June 2^nd: US jobs data

The incoming US nonfarm payrolls report should determine whether oil benchmarks can further pare their losses for the week.

• Stronger-than-expected jobs figures could offset hopes for an imminent Fed pause, potentially unwinding some of oil’s recent gains.
   
• However, a weaker-than-expected US jobs report that amplifies hopes that the Fed can call time on this rate hike cycle may further boost Brent into the weekend.

 

Sunday, June 4th: OPEC+ decision

Markets are widely expecting that OPEC+ would stand pat on its production levels at its weekend meeting.

Yet, the fact that Brent remains well into sub-$80/bbl domain ensures that deeper output cuts by OPEC+ remains on the table.

• Another surprise OPEC+ output cut may send Brent skyrocketing once more towards $80/bbl.
   
• The decision to stand pat should leave oil prices languishing under the weight of demand-side fears.