Oil edges higher as tighter supply looms, growth concerns weigh
Summary:
- Oil gained over 6% last week on OPEC+ cuts, US inventory drop
- Progress on resuming Iraq northern oil exports in view
- US inflation data to help investors gauge Fed rate hike path
- OPEC, IEA reports due this week
Oil slipped on Monday, after rising for three straight weeks, as concern about further interest rate hikes that could curb demand balanced the prospect of a tighter market due to supply cuts from OPEC+ producers.
The US dollar rose after US jobs data pointed to a tight labour market, firming up expectations of another Federal Reserve rate hike. Dollar strength makes oil more expensive for other currency holders and can weigh on demand.
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Brent crude was down 9 cents, or 0.1%, at $85.03 a barrel by 1351 GMT on Monday, after earlier falling $1 US West Texas Intermediate slipped 15 cents, or 0.2%, to $80.55.
"Those who were bearish are questioning the demand outlook in light of the cuts, whilst clearly those who were bullish are now seeing even a tighter market over the second half," ING's head of commodities research Warren Patterson said.
"I am in the latter camp and still see prices moving higher from here as we go through the year."
Crude last week jumped more than 6% after OPEC+, the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, surprised the market with a new round of production cuts starting in May.
Adding to tightness in supply has been a shutdown of Iraq's northern exports. A deal was signed last week to restart the flows, but as of Thursday, they hadn't resumed.
Oil also drew support from a steeper-than-expected drop in US crude inventories last week, as well as a decline in gasoline and distillate stocks, hinting at rising demand.
In global financial markets, a USinflation report to be released on Wednesday could help investors gauge the near-term trajectory for interest rates.
Also coming up are monthly reports from OPEC on Thursday and the International Energy Agency on Friday, which will update oil demand and supply forecasts.
