Oil dipped as uncertainty about the strength of demand and direction of the global economy blunted recent supply-driven gains.
(Bloomberg) — Oil dipped as uncertainty about the strength of demand and direction of the global economy blunted recent supply-driven gains.
West Texas Intermediate traded below $78 a barrel after rallying about 2% over the previous two sessions. Fuel markets are slumping as refining margins shrink in Asia, with a hoped-for sharp rebound in China still proving elusive.
“The macroeconomic picture remains muddy,” said Ole Sloth Hansen, head of commodities strategy at Saxo Bank A/S. “Markets are struggling for direction with a general-level confusion seen across asset classes. Conflicting signals between OPEC+ production cuts and worries about an economic slowdown as seen through lower refinery margins” are keeping traders undecided about oil’s direction.
Shipments from Iraq’s north and the country’s Kurdish region remain halted — causing some tankers to leave ports there empty and indicating a resumption isn’t likely in coming days. There also are supply risks in Sudan, where heavy fighting continues between rival groups.
Russian exports remain resilient, however, despite Moscow’s earlier pledge to cut production, blunting the impact of the disruptions in the Middle East. Some Russian crude has been bought by Indian refiners above the Group of Seven-led price cap, according to India’s Oil Secretary Pankaj Jain. However, most transactions still remained below the limit, he said.
Service provider Halliburton Co. said Tuesday the outlook for oil drilling is bright, bucking rivals that predicted an imminent slowdown in demand. The company posted its strongest first-quarter profit in more than a decade.
Still, with traders waiting for stronger signs of demand growth to materialize, crude is hovering a few dollars above where it was just before the Organization of Petroleum Exporting Countries and its allies shook markets with a surprise output reduction at the beginning of April.
“The market correction is close to having run its course,” Hansen said. Brent dropping below $80 a barrel would likely push traders to start betting on additional cuts by OPEC and partners such as Russia.
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