Oil prices rose on Tuesday as investors assessed the impact of supply cuts by Opec+ producers ahead of the release of a host of reports on global economy and inflation, as well as crude demand and supply that could determine the market's direction.
Brent, the benchmark for two thirds of the world’s oil, was up 0.88 per cent to $84.92 a barrel on Tuesday at 7.08pm UAE time. West Texas Intermediate, the gauge that tracks US crude, was 1.34 per cent higher at $80.81 a barrel.
Oil prices dropped on Monday following their third weekly gain. Brent closed 1.1 per cent lower at 84.18 per barrel, while WTI dropped 1.2 per cent to 79.74 a barrel.
Crude prices rose last week after 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 said the 500,000 bpd cut it was implementing from March to June would continue until the end of the year.
The producers said the precautionary measure was aimed at supporting the stability of the oil market.
“Assessments for the impact of Opec+ cuts will come from the EIA [Energy Information Administration] and IEA [International Energy Agency] later this week as well as Opec’s own oil market report,” Edward Bell, senior director of market economics as Emirates NBD, said in a note on Tuesday.
Crude prices have rebounded from a 15-month low hit last month due to a banking crisis in the US that spread to Switzerland, leading to the collapse of four lenders and sparking a broad sell-off in financial markets.
A drop in US crude inventories as well as disruptions to the supply of about 450,000 barrels a day of oil to the global market from Iraq via Turkey helped in propelling prices higher.
The latest pledge of output cuts by Opec+ members has pushed the volume of their production caps to about 3.66 million bpd, which accounts for about 3.6 per cent of Opec’s 101.9 million bpd estimated world oil demand this year.
Although oil is still up about 6 per cent since the April 2 surprise announcement by Opec+ producers, traders are awaiting data on inflation and economy that will indicate global economic sentiment and potential demand for oil in the quarters to come.
“A tsunami of data and projections is expected to be unleashed starting later today, which is likely to buffet oil sentiment directly and indirectly,” Vanda Insights, a Singapore-based energy market intelligence company, said in a note.
The World Bank and the International Monetary Fund are 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 as well as its global financial stability report on Tuesday.
On Monday, the World Bank revised its 2023 global growth forecast slightly upwards to 2 per cent from a January forecast of 1.7 per cent on the improved outlook for China’s economy as it winds down pandemic-related restrictions.
China, the world’s second-largest economy, is projected to expand 5.1 per cent this year compared with 4.3 per cent in the bank’s January Global Economic Prospects report.
Other key data due this week includes US inflation and retail sales figures.
Inflation figures will help determine the US Federal Reserve's monetary policy direction. The Fed has been increasing its benchmark policy rates since March last year to bring inflation down to its 2 per cent target range.
The pace of growth in US payrolls fell for a second consecutive month in March, adding to recession concerns in the world's largest economy.
However, the World Bank on Monday said advanced economies, including the US, are doing a bit better than it expected in January.
“The short-term crude demand outlook will soon be clearer. This week, we will find if the US economy is taking the steps into the recession pool or if it is going to do a cannonball into it,” Edward Moya, senior market analyst at Oanda, said.
“Wall Street should have a strong handle on the trajectory of the economy after it gets a pivotal inflation report, the latest retail sales numbers and bank earnings along with their respective outlooks for the American consumer.”