Beijing, April 4 (BNA): Oil prices rose on Tuesday after OPEC+ plans to cut further production rocked markets the day before, with investors’ attention shifting to demand trends and the impact of higher prices on the global economy.
Brent crude futures rose 42 cents, or 0.5 percent, to $85.35 a barrel by 0632 GMT. US West Texas Intermediate (WTI) crude futures were trading at $80.85 a barrel, up 43 cents, or 0.5%.
Both benchmarks jumped more than 6% on Monday after the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, known as OPEC+, rocked markets with an announcement on Sunday of plans to slash production targets by another 1.16 million barrels per day (bpd). today).
The latest pledges bring the total volume of OPEC+ cuts to 3.66 million bpd, including a cut of 2 million bpd in October, according to Reuters calculations – equivalent to about 3.7 percent of global demand.
“The buying spree from the OPEC+ production cut has subsided and the market’s attention has shifted to the future demand outlook,” said Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan Securities.
“In the short term, demand is expected to pick up for the summer driving season, but higher oil prices may add to inflationary pressures and prolong interest rate increases in many countries, which could dampen demand,” he said.
Kikukawa also noted that the impact could renew concerns about the global financial industry.
OPEC+ production constraints have led most analysts to raise their Brent oil price forecasts to around $100 a barrel by the end of the year. Goldman Sachs raised its forecast for Brent crude to $95 a barrel by the end of this year, and to $100 for 2024.
The news added to investor concerns about rising costs for businesses and consumers, adding to fears that an inflationary shock to the global economy from higher oil prices would lead to further interest rate hikes.
Market watchers have been trying to gauge how long the US Federal Reserve might need to keep raising interest rates to calm inflation, and whether the US economy is heading into recession.
Manufacturing activity in the United States fell to its lowest level in nearly three years in March and could decline further due to tightening credit and higher borrowing costs.
“If crude oil can break through the strong resistance band at $82/$83, it could go back to the mid-90s low, but there will be sellers lining up to sell at those levels,” said Tony Sycamore, market analyst. In Sydney’s IG.
“But for anything more than that, something has to change dramatically on the demand side of the equation,” he said.
HF