Oil prices edged higher on Monday, having posted losses earlier as the demand outlook of the US and China remained dim, offsetting optimism over tighter supplies from output cuts by the Organization of the Petroleum Exporting Countries (OPEC) and the resumption of US fuel reserves buyback.
Brent crude oil futures gained 0.15% to $74.28 per barrel after falling 0.35% to $73.91 per barrel earlier in the session. The US West Texas Intermediate (WTI) crude futures traded 0.23% higher to $70.22 per barrel, following an earlier decline of 0.29% to $69.34 per barrel.
In the previous week, the two benchmarks stumbled for the fourth straight week to record their longest streak of weekly drops since September 2022 due to concerns over a potential recession in the world’s largest economy that would stem from a significant historic default risk in the first two weeks of June.
Economic Woes Still Pressure Oil Despite Tighter Supplies
Weaker outlooks for fuel demand continued to weigh on oil prices as uncertainty on China’s economic recovery remained, while worries surrounding the US banking sector have also kept markets on edge.
Investors are expected to look for signs of better oil demand in China’s upcoming economic data on industrial production, fixed assets investment, and retail sales.
Analyst Tony Sycamore stated that sentiment towards crude oil would stay subdued as the market continues to see a bumpy re-opening in China and concerns over a possibly sluggish US economy at a time when the “X-date” deadline for the debt ceiling approaches, plus a stronger greenback.
Still, a tightening in global crude supplies may occur in the second half as OPEC and its allies (OPEC+), including Russia, plan to trim further output that is cutting the availability of sour crude.
The OPEC+ in April said certain members would perform additional reductions of about 1.16 million barrels per day (bpd) on production, bringing the overall volume of cuts to 3.66 million bpd.
However, Iraq’s Minister of Oil, Hayan Abdel-Ghani, does not expect the group to perform more oil output cuts at its meeting next month.
US Energy Secretary Jennifer Granholm stated last week that her department might begin buying back oil for the Strategic Petroleum Reserve (SPR) once it concludes a congressionally mandated sale in June.