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Oil stabilises, set for weekly fall on US economy concerns

May 3, 2024

Oil prices are rising today as OPEC+ members discuss possibly extending their supply cuts. Despite this upward movement, Brent and West Texas Intermediate (WTI) crude are set to end the week with losses, influenced by U.S. economic uncertainties and minimal impact on oil supplies from the ongoing Israel-Hamas conflict.

Chart of oil prices on the VT Markets trading app. Oil price is shown here stabilising.

Picture: Oil prices rising as seen on VT Markets app.

OPEC+ weighs continuing supply cuts

With the upcoming OPEC+ meeting on June 1, there are indications from within the group that it might continue its current reduction of 2.2 million barrels per day past June, depending on global demand for oil.

Impact on interest rates and economic activity

The U.S. Bureau of Labor Statistics today releases the monthly nonfarm payroll report, a critical measure of the country’s economic health that the Federal Reserve uses to guide interest rate decisions. These rates directly affect economic activity and consequently oil demand. A robust job report might alleviate economic slowdown concerns but could also strengthen the argument for higher interest rates, potentially suppressing growth.

Baker Hughes will also report its weekly count of oil and gas rigs today, providing insight into future crude production levels. An increase in rigs typically indicates an expected rise in production, which might relieve some price pressures if demand stays subdued. Conversely, a decrease could support higher prices, especially if OPEC+ decides to maintain its production cuts.

As Brent and WTI aim for weekly declines of 6.3% and 5.6%, respectively, the market remains vigilant of geopolitical events and macroeconomic data. The possibility of OPEC+ extending its production cuts could push prices upward, but persistent worries about the U.S. economy and its effects on global oil demand loom large over market sentiments.

You might also be interested: Oil Prices See Rebound with U.S. Purchase Plans

As we navigate these complex interplays of supply decisions by OPEC+, economic indicators from the U.S., and evolving geopolitical tensions, the oil market presents a dynamic landscape that’s ripe with opportunity for traders. For those looking to leverage these fluctuations, now is a crucial time to engage with the market.

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