Prices fell this week amid signs of weak manufacturing growth in China, the world’s biggest oil importer, and after the United States, the world’s biggest oil consumer, raised interest rates to their highest levels since 2007, which could limit economic growth in the short term. , but the Federal Reserve opened the door to stopping the monetary tightening cycle, which began in March 2022 with 10 interest rate hikes until its last meeting in May.
However, with some positive growth in the US service sector and expectations that voluntary production cuts by major producers that began this month will limit supply, supporting market buying.
“Oil is starting to find some support as the market has priced in all the bad supply and demand news,” said Iwanda analyst Edward Moya.
price movement
As of 0719 GMT, Brent crude futures were up 78 cents, or 1.08%, at $73.11 a barrel. But since Friday’s close, Brent crude has fallen more than 9% and earlier in the day fell to $71.28.
West Texas Intermediate crude futures rose 53 cents, or 0.9%, to $69.10 a barrel, after losing about 11% from Friday to Wednesday’s close.
As the Fed raised interest rates by a quarter of a percentage point as expected on Wednesday, it signaled that it may pause further hikes to give officials time to assess the implications of recent bank failures and to wait for clarification on the raising of the American debt ceiling.
The collapse of the third US bank since March (First Republic Bank), driven by its inability to manage high interest rates, also affected financial markets in general.
Meanwhile, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, in an alliance known as OPEC+, have initiated voluntary production cuts of around 1.16 million barrels. per day at the beginning of this month, and these reductions should support the market in the future.
“It looks like OPEC+ will finally have to show that it can meet production cut quotas and may be able to signal more cuts to come,” Moya said.
Investors are also awaiting developments from the European Central Bank, which is expected to raise interest rates for the seventh straight meeting on Thursday.
But worries about Chinese demand still weighed on the market, particularly after a private sector survey on Thursday showed factory activity unexpectedly fell in April due to weak domestic demand.
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