Brent Stable as Market Digests Fresh Output Curbs

By Adedapo Adesanya

The Brent crude was relatively stable on Tuesday as it only added 1 cent to trade at $84.94 per barrel, with investors weighing the planned production cuts by the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) against weak economic data from the United States and China that could suggest cooling oil demand.

Also, the US West Texas Intermediate (WTI) crude futures chalked up 29 cents to close at $80.71 per barrel after both crude benchmarks gained more than 6 per cent on Monday in reaction to the shock OPEC+ announcement of voluntary production curbs of 1.66 million barrels per day from May until the end of 2023.

Saudi Arabia alone would reduce its output by 500,000 barrels per day, and Russia would extend an earlier production cut of the same size until the end of the year.

The additional cuts deepen the global supply reduction from OPEC+ to a total of 3.66 million barrels daily, which is equal to 3.7 per cent of the total.

The production curbs led many analysts to raise their Brent oil price forecasts to around $100 per barrel by year-end. Goldman Sachs lifted its forecast for Brent to $95 a barrel by the end of 2023 and to $100 for 2024.

This continued to overshadow data from China and US as the latest purchasing managers’ index (PMI) reading for China showed a decline in March, suggesting setbacks along the way to recovery after removing COVID-19 curbs.

The March reading of China’s PMI fell to a neutral level from a month earlier, suggesting the rebound following the COVID-19 restrictions may not be as smooth and linear as hoped.

The Caixin reading of the country’s PMI stood at around 50 last month, down from 51.6 in February. The official PMI reading, released at the end of last week, also marked a decline from 52.6 in February to 51.9 in March.

Also, US job openings in February fell to the lowest level in nearly two years, and a slump in US manufacturing activity in March raised concerns about oil demand.

Meanwhile, US crude oil stockpiles were more than 4 million barrels last week, according to market sources citing American Petroleum Institute figures on Tuesday.

The US Energy Information Administration will release its data at 10:30 a.m. (3:30 PM Nigerian time) on Wednesday.