Oil steady as markets weigh OPEC+ surprise cuts amid demand woes

April 05, 2023 05:07 AM AEST | By Reuters
Follow us on Google News:
Image source: Reuters

By Arathy Somasekhar

HOUSTON (Reuters) - Oil prices were little changed in choppy trading on Tuesday as investors weighed OPEC+ plans to cut more production against weak economic data from the United States and China that could suggest cooling oil demand.

Brent crude futures settled 1 cent higher at $84.94 a barrel, while U.S. West Texas Intermediate (WTI) crude futures closed 29 cents, or 0.4%, higher at $80.71 a barrel.

"We will need to see demand hold and grow to push crude into the upper $80's," said Dennis Kissler, senior vice president of trading at BOK Financial.

Brent crude and WTI had jumped by more than 6% on Monday after the Organization of the Petroleum Exporting Countries and allies including Russia, collectively known as OPEC+, rocked markets with an announcement of voluntary production cuts of 1.66 million barrels per day (bpd) from May until the end of 2023.

The latest pledges bring the total volume of cuts by OPEC+ to 3.66 million bpd, including a 2 million-barrel cut last October, equal to about 3.7% of global demand.

The OPEC+ production curbs led many analysts to raise their Brent oil price forecasts to around $100 per barrel by year-end. Goldman Sachs lifted its forecast for Brent to $95 a barrel by the end of this year, and to $100 for 2024.

A slump in U.S. manufacturing activity in March to its lowest level in nearly three years and weak manufacturing activity in China last month have raised concerns about oil demand.

Investors also worried about higher costs for businesses and consumers, raising fears an inflationary hit to the world economy from rising oil prices will result in more interest rate hikes.

Stock markets also declined after data suggested a cooling in the U.S. labor market.

Market-watchers have been trying to gauge how much longer the U.S. Federal Reserve may need to keep raising rates to cool inflation, and whether the U.S. economy may be headed for a recession.

Investors now see a chance of about 40% that the Federal Reserve will hike rates by a quarter basis point in May, with a roughly 60% chance of a pause.

(Reporting by Arathy Somasekhar in Houston; Additional reporting by Ahmad Ghaddar in London, Yuka Obayashi in Tokyo and Andrew Hayley in Beijing; Editing by Jonathan Oatis, Matthew Lewis and Deepa Babington)


The above content is directly sourced from Reuters under a contractual arrangement. The content is being provided as a convenience and for informational purposes only; and does not constitute an endorsement or approval by Kalkine Media of any of the products, services, or opinions of the organization or individual. The user is apprised that Kalkine Media bears no responsibility for the accuracy, legality, or content of Reuters, any external sites, or for that of subsequent links. The user is requested to contact Reuters directly for answers to questions regarding the content. Please note that Kalkine Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.

Top ASX Listed Companies

We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it. OK