Economy 2 MIN READ

Oil prices stable as economic fears balance OPEC+ cuts, US stock draw

April 5, 2023By Reuters

Oil prices were stable on Wednesday, as the market weighed gloomy economic prospects against expectations of US crude inventory declines and OPEC’s voluntary output cuts announcement.

Brent crude futures LCOc1 gained 22 cents, or 0.26%, to USD 85.16 a barrel by 0747 GMT. West Texas Intermediate US crude was up 12 cents, or 0.15%, to USD 80.83 a barrel.

Support followed an industry report showed showing US crude inventories fell by about 4.3 million barrels in the week ended March 31. The official inventory report by the US Energy Information Administration is due at 1430 GMT on Wednesday.

Bullish sentiment continued after voluntary cuts pledged by the Organization of Petroleum Exporting Countries and allies including Russia, a group known as OPEC+.

“Energy traders are still digesting the OPEC+ surprise production cut and any news that suggests the oil market will remain even tighter is going to send prices even higher,” said Edward Moya, an analyst at OANDA.

The OPEC+ plan would bring the total volume of cuts by the group to 3.66 million barrels per day (bpd), including a 2 million bpd cut last October, equal to about 3.7% of global demand.

However, weak manufacturing activity in the US and China–the two biggest oil consumers–have capped oil oil price gains.

“The present raises concerns about healthy economic expansion as Chinese, euro zone and US manufacturing activity slowed last month,” said Tamas Varga of oil broker PVM.

Record Russian diesel flows to the Middle East in March, and the sluggish performance of middle distillates contracts have “acted acted as a brake on any attempt to push crude oil prices meaningfully higher,” Varga said.

Traders will be looking for cues on broader economic trends from the US non-farm payrolls data due later this week, analysts say.

“The US non-farm payroll will probably be the most influential economic data that drives the broad market’s movements,” said Tina Teng, an analyst at CMC Markets.

(Reporting Sudarshan Varadhan in Singapore, by Laila Kearney in New York; Editing by Louise Heavens)

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