After a senior Russian official said that the world's oil markets were in balance, oil prices stabilized on Thursday, reversing losses from the previous session.
Alexander Novak, the deputy prime minister of Russia, said OPEC+ does not see the necessity for additional reductions in oil production but is always free to change its strategy.
Russia is a member of the OPEC+ group of oil-producing countries, which last month announced a joint cut of around 1.16 million barrels per day. The U.S. criticized the unexpected move as irresponsible and it led to an increase in oil prices.
West Texas Intermediate oil rose 46 cents to $74.76 per barrel, while Brent crude futures rose 68 cents to $78.37 per barrel.
According to Andrew Lipow, head of Lipow Oil Associates in Houston, “short-covering from the sell-off over the last several days has caused the small increase in crude oil prices.”
The benchmarks fell by roughly 4% on Wednesday as concerns about a potential US economic slowdown outweighed a greater-than-anticipated drawdown in US crude stockpiles. [EIA/S]
Investors keep an eye on economic statistics for any hints about the direction of the energy demand.
Even though unemployment claims decreased in the week ending April 22, statistics indicated that the United States' economic growth slowed down in the first quarter more than was anticipated.
Oil is now struggling to handle the mixed bag of interest rate developments, according to Price Futures Group analyst Phil Flynn.
Wednesday's U.S. statistics revealed that capital goods expenditure decreased more than was anticipated. As a result of First Republic Bank's ongoing decline and bad risk sentiment that rippled across the banking industry, oil prices also came under pressure.
Oil trader PVM's Tamas Varga cites gas and heating oil as “the main possible culprit for the outsized weakness” and says that low refinery margins are “a major drag on oil prices.”
According to Varga, inventories of this commodity are hesitant to run out, presumably as a result of robust Russian exports.
Despite an EU ban and a restriction on oil prices, sources told Reuters that Russia has expanded its shipments of refined goods.
According to Ole Hansen, director of commodities strategy at Saxo Bank, declining refinery profit margins might cause runs to be reduced and the need for oil to decline even further.
After reaching $4 per barrel on April 12, backwardation in the Brent futures curve has decreased to just over $2.20 per barrel.
Backwardation is a common sign of a restricted supply when prices for the front-month contract are higher than those for contracts for subsequent months.
The first quarterly print of GDP growth for the euro zone, which is coming on Friday, will be closely watched by the markets for guidance. When the European Central Bank meets on May 4, the statistics may have an impact on its monetary policy choices.