Oil prices were little changed in choppy trading on Tuesday as investors weighed OPEC+ planned production cuts against weak U.S. and Chinese economic data that could suggest cooling oil demand.
Brent crude futures settled 1 cent higher at $84.94 a barrel, while U.S. West Texas Intermediate (WTI) crude futures closed up 29 cents, or 0.4%, at $80.71 a barrel.
“We will need to see demand hold and grow to push crude into the upper $80’s,” said Dennis Kissler, senior vice president of trading at BOK Financial.
Brent crude and WTI had jumped by more than 6% on Monday after the Organization of the Petroleum Exporting Countries and allies including Russia, collectively known as OPEC+, rocked markets with an announcement of voluntary production cuts of 1.66 million barrels per day (bpd) from May until the end of 2023.
U.S. job openings in February fell to the lowest level in nearly two years and a slump in U.S. manufacturing activity in March raised concerns about oil demand. Weak manufacturing activity in China last month also added to the woes.
Stock markets declined on the weaker economic data, while gold crossed the key $2,000 level as investors rushed to buy the safe haven asset.
The economic signals ran alongside fears of an inflationary hit to the world economy, as rising oil prices fuel higher interest rates.
OPEC+’s latest output targets bring the total volume of cuts by OPEC+ to 3.66 million bpd, including a 2 million-barrel cut last October, equal to about 3.7% of global demand.
The production curbs led many analysts to raise their Brent oil price forecasts to around $100 per barrel by year-end. Goldman Sachs (NYSE:GS) lifted its forecast for Brent to $95 a barrel by the end of 2023, and to $100 for 2024.
Meanwhile, U.S. crude oil stockpiles drew by more than 4 million barrels last week, according to market sources citing American Petroleum Institute figures on Tuesday. A preliminary Reuters poll had estimated a 2.3 million barrel drop in inventories.
The U.S. Energy Information Administration will release its data at 10:30 a.m. (1430 GMT) on Wednesday.
Market watchers have been trying to gauge how much longer the U.S. Federal Reserve Bank may need to keep raising rates to cool inflation, and whether the U.S. economy may be headed for a recession.
Investors now see an about 40% chance the Fed will hike rates by a quarter basis point in May, with a roughly 60% chance of a pause.