Oil fell on Thursday as weak US economic data raised concerns about a potential global recession and reduced demand. Still, benchmark prices headed for weekly gains after OPEC+ announced further production cuts and US oil inventories plummeted.
Brent crude futures were down 41 cents, or 0.5%, to $84.58 a barrel as of 0616 GMT. West Texas Intermediate US crude (WTI) fell 45 cents, or 0.6%, to $80.16 a barrel.
Brent and WTI have gained nearly 6% so far this week after the Organization of the Petroleum Exporting Countries and allies including Russia promised voluntary production cuts.
The crude oil rally stalled as it struggled with headwinds from weak US economic data. This balanced the positive fundamentals.
The US services sector slowed more than expected in March as demand cooled, accelerating the Federal Reserve’s fight against inflation.
New Zealand’s central bank raised interest rates more than expected on Wednesday, and India will likely be the next country to raise rates.
Meanwhile, job postings in the US fell to the lowest level in nearly two years in February, indicating that the labor market has cooled. A pile of soft economic data has distorted market sentiment, fueled recession fears, and prompted investors to adopt risk aversion strategies.
The US dollar index strengthened on Thursday, rebounding from a two-month low. A stronger dollar could reduce oil demand as crude oil becomes more expensive for holders of other currencies.
The slowdown in the US economic outlook is putting pressure on US oil prices, however, prices are expected to increase until the end of the second quarter.
Backing the market, the world’s largest oil exporter, Saudi Arabia, has increased the prices of its flagship crude for the third consecutive year for Asian buyers. This indicates that demand in the region is getting stronger.
U.S. crude inventories fell by 3.7 million barrels last week, about 1.5 million barrels more than forecast, government data showed.
Gasoline and distillate stocks also fell more than expected, down 4.1 million barrels and 3.6 million barrels, respectively.
