Oil’s slump slowed on Friday, hovering just above the level at which key producers in the OPEC+ alliance surprised traders with shock production cuts.
(Bloomberg) — Oil’s slump slowed on Friday, hovering just above the level at which key producers in the OPEC+ alliance surprised traders with shock production cuts.
Brent fluctuated around $81 a barrel with West Texas Intermediate almost $4 lower than that. Prices were pressured by a stronger dollar, making commodities priced in the currency less attractive, as well as recent weak economic signals in the US and Europe. Equities were mixed.
Oil has given up most of the gains that ensued after Saudi Arabia and other countries in the Organization of Petroleum Exporting Countries and its allies blindsided markets with a surprise pledge to cut production. First-month Brent settled at $79.77 on March 31, before the reductions were announced and futures spiked higher.
Margins from processing crude have weakened recently, signaling that refineries didn’t manage to pass on higher costs. The threat of weakening economic growth has also undermined the market for physical barrels.
“Fear of the unknown — i.e. demand drop due to recession — continues to weigh,” said Keshav Lohiya, founder of consultant Oilytics.
Manufacturing PMI data for Germany and the Eurozone came in below estimates on Friday, although services figures were stronger. In South Korea, a large oil refiner may cut runs this summer, fueling concerns about demand for crude.
Meanwhile, the US could begin to refill its Strategic Petroleum Reserve as soon as the third quarter if the price is right. The timing will depend on infrastructure maintenance and how well President Joe Biden’s administration can manage a congressionally mandated sale of 26 million barrels by June 30.
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