On Wednesday, oil prices remained mostly steady despite U.S. crude and fuel stockpiles experiencing more significant declines than anticipated. This was due to a balancing act between worsening economic prospects and expectations of reductions in U.S. crude inventory and output cuts by OPEC+ producers.
Brent crude futures concluded 0.1% higher at $84.99 a barrel, while West Texas Intermediate crude ended 0.1% lower at $80.61 a barrel.
According to government data, U.S. crude inventories decreased by 3.7 million barrels, about 1.5 million barrels more than what was forecasted. Gasoline and distillate stocks also fell more than expected, decreasing by 4.1 million barrels and 3.6 million barrels, respectively.
Some experts believe that the recent rally in oil prices made investors cautious about reacting to the positive news. Giovanni Staunovo, a UBS analyst, stated, “Maybe following the strong price rally this week, investors are a bit cautious about jumping on a strong report.”
On Monday, oil prices jumped more than 6% after OPEC+ producers pledged voluntary production cuts. Johannes Rauball, a Kpler crude analyst, commented, “The decision by OPEC+ to voluntarily cut crude supplies from May onwards has come as a surprise to many, considering that the global crude balance was already expected to become increasingly tight over the summer months, something that will certainly help keep crude prices supported.”
However, the data showing cooling economic conditions counterbalanced the higher demand for crude and fuel. In February, U.S. job openings fell to the lowest level in almost two years, indicating that the labor market was cooling. Craig Erlam, a senior markets analyst at OANDA, stated, “(The data) could be the first signs of weakness in the U.S. labor market, and that is huge. Without it, (the U.S. Federal Reserve) will find it very hard to make the argument that it is pausing the tightening cycle.”
Oil traders will be monitoring the U.S. non-farm payrolls data, which is due this week, for cues on broader economic trends. Weak economic data from China and the U.S. raised demand fears. Tamas Varga, an oil broker at PVM, said, “The present raises concerns about healthy economic expansion as Chinese, eurozone, and U.S. manufacturing activity slowed last month.”
According to Varga, record Russian diesel flows to the Middle East in March and the sluggish performance of middle distillates contracts “acted as a brake on any attempt to push crude oil prices meaningfully higher.”
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