Oil up after OPEC+ maintains output cuts but shaky demand caps gains

Oil up after OPEC+ maintains output cuts but shaky demand caps gains

Oil prices inched up on Thursday, recovering some of the losses from the previous session. This came after an OPEC+ panel decided to maintain oil output cuts in order to keep supply tight. However, gains were limited due to uncertainty surrounding demand.

At 0335 GMT, Brent crude oil futures rose by 63 cents to reach $86.44 a barrel, while U.S. West Texas Intermediate crude (WTI) increased by 49 cents to reach $84.71.

On Wednesday, oil prices fell by more than $5 as attention turned to a gloomier macroeconomic outlook and the destruction of fuel demand. This followed a meeting of the OPEC+ panel, which consists of the Organization of the Petroleum Exporting Countries and its allies led by Russia.

During the meeting, the OPEC+ ministerial panel decided not to make any changes to the group’s oil output policy. Saudi Arabia announced that it would continue with a voluntary cut of 1 million barrels per day (bpd) until the end of 2023, while Russia would maintain a 300,000 bpd voluntary export curb until the end of December.

According to analysts at National Australia Bank, the market is expected to remain in deficit throughout the fourth quarter. The softer prices decrease the likelihood of OPEC easing supply constraints.

However, there are concerns on the downside. A survey suggests that the euro zone economy likely contracted in the last quarter, with demand falling in September at the fastest pace in almost three years. This is due to consumers reducing spending amid rising borrowing costs and prices.

Furthermore, there has been a significant decline in U.S. gasoline demand. The U.S. Energy Information Administration (EIA) reported that finished motor gasoline supplied, which serves as a proxy for demand, fell to about 8 million bpd last week, the lowest level since the beginning of the year.

Yeap Jun Rong, a market strategist at IG, stated that the recent rally in crude oil prices has been driven by the narrative of tighter supply dynamics and a resilient global economy. However, there is now some discomfort among bulls as these tailwinds are not as prominent as before.

Given the uncertain demand outlook, weaker U.S. economic data, and a significant increase in gasoline inventories, it will be challenging for oil prices to rise further, according to Yeap Jun Rong.

In September, the U.S. services sector experienced a slowdown, with new orders reaching a nine-month low. However, the pace remains consistent with expectations for solid economic growth in the third quarter.

The article was reported by Katya Golubkova in Tokyo and Jeslyn Lerh in Singapore. It was edited by Sonali Paul and Jamie Freed. The Thomson RushHourDaily Trust Principles apply.

About News Team

Hi, I'm Alex Perez, an experienced writer with a focus on lifestyle and culture news. From food and fashion to travel and entertainment, I love exploring the latest trends and sharing my insights with readers. I also have a strong interest in world news and business, and enjoy covering breaking stories and events.

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