Oil prices showed a modest increase in early trade on Thursday, clawing back from the significant losses experienced in the previous session. This rebound followed the decision of an OPEC+ panel to maintain oil output cuts, aiming to ensure a controlled supply amidst growing concerns regarding a potential downturn in global economic growth, Reuters news report said.
Brent crude oil futures edged up by 11 cents to reach $85.92 per barrel, while U.S. West Texas Intermediate crude (WTI) saw a rise of 7 cents, reaching $84.29 at 0040 GMT.
During Wednesday’s trading, oil prices experienced a decline of over $5, driven by a somber macroeconomic outlook and fears of fuel demand erosion. This drop followed a meeting of the OPEC+ panel, consisting of the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia.
The OPEC+ ministerial panel opted to maintain the group’s existing oil output policy, with Saudi Arabia committing to a voluntary cut of 1 million barrels per day (bpd) until the end of 2023. Concurrently, Russia affirmed its commitment to a 300,000 bpd voluntary export curb until the end of December.
Analysts at National Australia Bank noted, “We continue to see the market in deficit through the fourth quarter, and the softer prices reduce the probability OPEC will ease supply constraints.”
However, economic indicators present a mixed picture, indicating both positive and negative factors affecting the oil market. On one hand, the euro zone economy is expected to have contracted in the last quarter, suggesting a decline in demand due to rising borrowing costs and prices. On the other hand, the U.S. services sector, while experiencing a slowdown in September, remains consistent with expectations for solid economic growth in the third quarter.
In light of these dynamics, JP Morgan mentioned in a note, “Fuel prices may be closer to consumers’ pain threshold than inflation-adjusted prices might suggest,” forecasting the oil price to decline to $86 per barrel by year-end from this year’s peak of $97 per barrel reached in September. The oil market remains influenced by a delicate balance of supply, demand, and broader economic conditions.