Oil remained on track for weekly gains on Thurday, with further production cuts targeted by OPEC+ and a drop in US oil inventories overshadowing fears over global economic growth.
Brent and US crude have both gained more than 6 per cent this week, heading for a third weekly gain after the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia – a group known as OPEC+ – pledged surprise production cuts.
Crude dipped on Thursday, however, as weak US economic data raised concern over economic growth. The US services sector slowed more than expected in March and US job openings in February dropped to their lowest in nearly two years.
“The oil market’s bullish momentum may have paused, but upside potential remains given the tightening supply backdrop,” said Stephen Brennock of oil broker PVM.
Brent crude fell 34 cents, or 0.4 per cent, to $84.65 a barrel by 0803 GMT. West Texas Intermediate US crude dipped by 29 cents, or 0.4 per cent, to $80.32.
The US dollar index strengthened on Thursday, rebounding from a recent two-month-low. A stronger dollar makes crude becomes more expensive for holders of other currencies and tends to reflect greater risk aversion among investors.
“A slowdown in the US economic outlook is weighing on the upside on US oil prices, however we continue to expect a further uptick in oil prices to the end of the quarter,” National Australia Bank analysts Baden Moore and Adam Skelton wrote in a note.
Also underpinning the market was this week’s snapshot of US supply, which showed crude inventories fell by a more than expected 3.7 million barrels while gasoline and distillate inventories also declined, hinting at rising demand.