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Oil steadies as market digests supply and demand outlook
Global Banking & Finance Review®
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By Natalie Grover
LONDON (Reuters) -Oil prices were little changed on Thursday as the market digested tighter crude supply alongside fears of global economic slowdown.
Brent crude futures edged up 29 cents to $76.94 a barrel by 0838 GMT after a 0.5% gain the previous day.
U.S. West Texas Intermediate crude firmed by 37 cents to $72.16 after rising by 2.9% in post-holiday trade on Wednesday to catch up with Brent’s gains earlier in the week.
On the supply side, top oil exporters Saudi Arabia and Russia announced a fresh round of output cuts for August. The total cuts now stand at more than 5 million barrels per day (bpd), equating to 5% of global oil output.
The cuts, along with a bigger than expected drop in U.S. crude stocks, provided some support for prices.
“The oil balance will likely tighten and so will financial conditions, judging by the Fed minutes released last night,” said PVM analyst Tamas Varga.
“Persistent recession worries will probably encumber, but not prevent, oil from marching higher.”
The market has been expecting interest rates in the U.S. and Europe to rise further to tame stubbornly high inflation while fears of a global recession have been heightened by recent surveys showing that factory and services activity in China and Europe has slowed.
Minutes released on Wednesday showed that a united U.S. central bank agreed to hold rates steady at its June meeting to buy time and assess the need for further hikes, even though most attendees expected they would eventually need to tighten policy further.
(Reporting by Natalie Grover in LondonAdditional reporting by Yuka Obayashi in Tokyo and Jeslyn Lerh in SingaporeEditing by David Goodman)
Crude oil is a natural, unrefined petroleum product composed of hydrocarbon deposits and other organic materials. It is extracted from the ground and refined into various fuels and products.
Brent crude futures are contracts for the future delivery of Brent crude oil, which is a major trading classification of crude oil originating from the North Sea. They are used as a benchmark for oil prices globally.
The Federal Reserve, often referred to as the Fed, is the central bank of the United States. It regulates the U.S. monetary and financial system, aiming to provide a stable financial environment.
A global economic slowdown refers to a period when the economic growth rate of countries around the world decreases. This can lead to reduced consumer spending, lower investment, and increased unemployment.
Output cuts in oil production are reductions in the amount of oil that producers extract and sell. These cuts are often implemented to stabilize or increase oil prices during periods of oversupply.
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