Oil: Upside risks linger as recovery questioned – ING

ING strategists Michiel Tukker and Benjamin Schroeder note that Oil has returned to pre-war levels but argue the market is overly optimistic about the speed and durability of the supply recovery. They highlight an unstable balance between demand, physical buying and strategic reserves, and stress that second-round inflation risks and Oil’s future trajectory will only become clearer later this year.

Supply recovery doubts support prices

"The recent fall in oil prices can partly be attributed to the current imbalance between supply and demand."

"Physical buyers are still awaiting better pricing while countries’ strategic reserves continue to add supply to the market."

"This is not a stable equilibrium, however. At some point, buyers will need to enter the market, and reserves will have to be replenished."

"Oil is stabilising around pre-war levels, but we continue to see upside risks in the near term that could pose some upward pressure on rates."

"Only later this year will we have a better understanding of the second-round inflation impact and more certainty about the trajectory of oil."