Oil futures drifted lower early Wednesday, steadying after sharp gains that followed a round of unexpected OPEC+ production cuts last weekend, as traders weigh worries over the economic outlook against signs of further inventory declines in the U.S.
Price action
-
West Texas Intermediate crude for May delivery
CL.1,
-0.02% CLK23,
-0.02%
fell 30 cents, or 0.4%, to $80.41 a barrel on the New York Mercantile Exchange. -
June Brent crude
BRN00,
-0.05% BRNM23,
-0.05% ,
the global benchmark, dropped 28 cents, or 0.3%, to $84.66 a barrel on ICE Futures Europe. -
Back on Nymex, May gasoline
RBK23,
+0.53%
rose 0.3% to $2.75 a gallon, while May heating oil
HOK23,
-0.06%
was off 0.2% at $2.661 a gallon. -
May natural gas
NGK23,
+0.57%
fell 0.3% to $2.099 per million British thermal units.
Market drivers
Brent and WTI were both in danger of snapping a four-day winning streak, which included sharp gains over the last two sessions following the weekend announcement by Saudi Arabia and some of its OPEC+ allies of a decision to cut production by around 1.16 million barrels a day in May through year-end, alongside a decision by Russia to extend cuts of 500,000 barrels a day through the end of the year.
Read: 6 things investors need to know about the surprise OPEC+ production cuts
Several Wall Street banks have raised their forecast for crude prices following the move.
“These additional cuts mean that the market will be even tighter later in the year. As a result, we expect Brent to trade above $100 a barrel over the second half of 2023,” wrote analysts at ING, in a note. They expect Brent to average $101 a barrel over the second half of the year and $104 a barrel over the fourth quarter.
See: Here’s what is really behind OPEC+ oil-production cuts, say energy analysts
Crude futures prices ended higher on Tuesday but off session highs, seeing a brief pullback into negative territory after data showed U.S. job openings fell to a 21-month low, reinforcing worries over recession fears that have plagued the oil market, sending it to 15-month lows in March.
“With oil bulls encouraged by the ‘OPEC put,’ precisely engineered to keep prices above $80, dips are getting covered so far,” said Stephen Innes, managing partner at SPI Asset Management. “Although prices are materially higher this week, thanks to OPEC intervention, last week’s recession headwinds did not magically disappear.”
Supply data
The American Petroleum Institute, an industry trade group, late Tuesday said U.S. crude inventories fell by 4.3 million barrels last week, while gasoline stocks dropped 4 million barrels and distillates declined 3.7 million barrels, according to a source citing the data.
Official inventory data from the Energy Information Administration is due Wednesday morning. Analysts surveyed by S&P Global Commodity Insights, on average, look for crude supplies to show a fall of 10.4 million barrels, while gasoline stocks are seen down 1.3 million barrels and distillates down 140,000 barrels.
This post was originally published on Market Watch
