Washington, DC, May 4 (BNA): Oil prices recovered slightly on Thursday but were unable to recoup the drop of more than 9% in the past three days as demand concerns among large consumers outweighed signs that the US may halt interest rate increases.
Brent crude futures rose 17 cents, or 0.2 percent, to $72.50 a barrel by 0257 GMT. But since Friday, Brent has fallen more than 9% and earlier on Thursday fell to $71.28.
US West Texas Intermediate crude rose 2 cents to $68.62 a barrel. WTI is down nearly 11% from Friday through Wednesday’s close, and earlier on Thursday fell to $63.64, Reuters reported.
Prices fell this week amid signs of weak manufacturing growth in China, the world’s largest oil importer, and after the United States, the world’s largest oil user, raised interest rates to their highest levels since 2007 on Wednesday, threatening future economic growth there.
However, with some positive growth in the US services sector and expectations that production cuts by major producers that began this month will limit supply, investors and analysts are starting to buy back into the market.
“Oil is starting to find some support as all the bad supply and demand news has been priced in,” said Edward Moya, an analyst at OANDA.
While the Fed raised interest rates by a quarter of a percentage point as expected, it has signaled it may pause further hikes to give officials time to assess the fallout from recent bank failures and wait for clarity on the row over raising the US debt ceiling.
The collapse of the third US bank since March, driven by its inability to manage high interest rates, also affected financial markets in general.
The Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, in a group known as OPEC +, began voluntary production cuts of about 1.16 million barrels per day at the beginning of this month, and it is expected to support this market going forward during the peak summer demand period.
“It appears that OPEC+ will have to finally show that it can meet quotas for production cuts and may be in a position to signal more cuts to come,” Moya said.
Investors are also awaiting developments from the European Central Bank, which is set to raise interest rates for the seventh consecutive meeting on Thursday.
Chinese demand concerns continue to weigh on the market especially after a survey of the private sector on Thursday showed that factory activity fell unexpectedly in April due to weak domestic demand.
Rial