Oil prices slumped on Thursday after weak US payroll data and taking some profits, but remained supported by tightness in supply as OPEC+ producers adhered to planned moderate output increases.
Brent crude was down 17 cents, or 0.2%, to $89.30 a barrel as of 0420 GMT, after rising 31 cents on Wednesday. West Texas Intermediate (WTI) crude was down 31 cents, or 0.4%, to $87.95 a barrel after gaining 6 cents the previous day.
Weak US data raises risk of job decline. U.S. private payrolls fell for the first time in a year in January, raising the risk of a sharp decline in employment that would deal a temporary setback to the labor market.
The dip might be a result of the shockingly low U.S. ADP employment print last night, but it is believed that the supply squeeze may drive oil prices higher through this year.
Tight global supply and geopolitical tensions in Eastern Europe and the Middle East have pushed oil prices up nearly 15% so far this year. Last week, crude oil gauges hit their highest prices since October 2014, with US crude hitting $89.72 on Wednesday and Brent hitting $91.70 on Friday.
Prices came under pressure late Wednesday as Iran’s Oil Minister said the country was ready to return to the oil market as soon as possible, but gave few details.
Russia-led allies known as OPEC+ have decided to stick with moderate increases in oil production of 400,000 barrels per day (bpd) as the group struggles to meet already existing targets and despite pressure from the United States.
The group blames rising prices on consumer countries that don’t invest enough in fossil fuels as they transition to green energy, while several OPEC+ sources said tensions between Russia and the United States are driving prices up.
The OPEC+ Joint Technical Committee said in a report that it expects the overall supply surplus in 2022 to reach 1.3 million barrels per day, slightly lower than the previous estimate of 1.4 million barrels per day.
The U.S. Energy Information Administration (EIA) said on Wednesday that despite rising expectations, U.S. crude inventories fell by 1 million barrels last week, while distillate stocks fell due to strong demand in both domestic and export markets.
Meanwhile, the US is preparing for the big winter storm, and these weather conditions could push oil prices higher. The storm is expected to affect much of the United States this week and spread to parts of the Northeast, bringing heavy snow, freezing rain and ice.