Oil prices remained stable on Monday, following their third weekly gain, as investors weighed the impact of the surprise move by Opec+ and its allies to cut production and the weakening economic outlook that could dampen crude demand.
Brent, the benchmark for two thirds of the world’s oil, was trading flat at $85.12 a barrel on Monday at 11.15am UAE time. West Texas Intermediate, the gauge that tracks US crude, was 0.07 per cent higher at $80.76 a barrel.
Brent added 6.8 per cent while WTI advanced 6.6 per cent last week as Opec+ members Saudi Arabia, the UAE, Iraq, Kuwait, Oman and Algeria said they would introduce voluntary oil production cuts of 1.16 million barrels per day from May until the end of this year.
Russia also said the 500,000 bpd cut it is implementing from March to June would continue until the end of the year.
The markets benefitted from “a pop on Monday and then trading sideways for much of the rest of the week as the impact of the surprise cuts from several Opec+ members filter through markets”, Edward Bell, senior director for market economics at Emirates NBD, said.
The producers said the precautionary measure is aimed at supporting the stability of the oil market.
While the move by Opec+ members propelled prices last week, concerns remain about the weakening global economic outlook that could dent crude demand.
While speculation that US could tip into recession this year is rife, oil bulls see the market tightening further after the Opec+ move.
“Those who were bearish are questioning the demand outlook in light of the cuts, while clearly those who were bullish are now seeing even a tighter market over the second half,” Reuters quoted ING's head of commodities research Warren Patterson as saying.
“I am in the latter camp and still see prices moving higher from here as we go through the year.”
The sideways trade on Monday indicates that the market awaits “fresh direction” that is “likely to come predominantly from the financial markets in this data-heavy week”, according to Vanda Insights.
“The troika of monthly oil market outlook reports — from the US Energy Information Administration, Opec and the International Energy Agency — are due out this week, though they may take a back seat to economic sentiment,” the Singapore-based energy market intelligence company said in a note on Monday.
Key data releases for this week include US inflation and retail sales data.
Inflation figures will help determine the US Federal Reserve's monetary policy direction.
The market broadly expects the Fed to increase its benchmark policy rate by 25 basis points when it meets on May 2 and 3 to bring inflation down to its target 2 per cent range, Vanda Insights said.
The pace of growth in US payrolls fell for a second consecutive month in March, which added to recession concerns in the world's largest economy.
The World Bank and the International Monetary Fund are also meeting in Washington this week to discuss the global economy, which the IMF expects will grow at less than 3 per cent this year.
The fund will release its latest global growth projections on Tuesday, as well as its global financial stability report the same day.
