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Oil broadly steady amid OPEC+ supply cut uncertainty, demand worries

Friday, 26 May 2023 | 13:00

Oil prices were broadly stable on Friday, as the market weighed in on conflicting messages on supply from Russia and Saudi Arabia ahead of the next OPEC+ policy meeting, a stronger U.S. dollar and worries of weaker-than-expected demand growth.

Brent crude was up 6 cents to $76.32 a barrel at 0627 GMT, while U.S. West Texas Intermediate rose 18 cents to $72.01 a barrel.

Benchmarks settled more than $2 per barrel lower on Thursday, after Russian Deputy Prime Minister Alexander Novak played down the prospect of further OPEC+ production cuts at its meeting in Vienna on June 4.

Both prices were still poised to post a second week of gain of slightly less than 1%.

Russian President Vladimir Putin said on Wednesday that energy prices were approaching “economically justified” levels, also indicating there could be no immediate change to the group’s production policy.

Their remarks contrasted with comments this week from Saudi Arabian Energy Minister Prince Abdulaziz bin Salman, the de-facto leader of the Organization of Petroleum Exporting Countries (OPEC), warning short sellers to “watch out”.

Some investors interpreted that as a signal OPEC+ could consider further output cuts.

The higher dollar, which has strengthened for a fifth session against a basket of major peers, with U.S. data pointing to a resilient economy even after an aggressive interest rate hike cycle by the Federal Reserve, kept a lid on upward price movement.

A stronger greenback makes dollar-denominated commodities more expensive for those holding other currencies, denting demand.

Worries of weaker-than-expected demand growth globally weighed on investor outlook.

“There are multiple signs that global demand growth is unlikely to come close to earlier year forecasts. China, which constitutes about half of most estimates, looks increasingly unlikely to reach anyone’s estimates for 2023,” Citigroup (NYSE:C) said in a client note.

“We will see some of these demand numbers being cut in the near future and that will continue to have a drag on oil market sentiment in the near term,” said Suvro Sakar, lead energy analyst at DBS Bank.

On the positive side, May supplies from OPEC+ and Russia have fallen mostly in line with the earlier agreement for further output cuts.

As of last week, OPEC+ members who agreed to earlier cuts have reduced their exports by 1.5 million barrels per day (bpd), while Russian exports fell 400,000 bpd from their respective peaks on April 25, with total exports from producers in the OPEC+ alliance down 1.4 million bpd month on month by May 23, JP Morgan analysts said in a note.
Source: Reuters

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