Oil prices gain ground as OPEC+ output cut hopes persist

May 03, 2024 (MLN): Global oil prices ticked upwards for the second straight session on prospects of OPEC+ continuing output cuts.

However, oil benchmarks are on track to record their steepest weekly drop since January 2024 as Middle East tensions eased and demand uncertainty arose.

Brent crude traded near $83.61 per barrel, up by 0.20% on the day.

While West Texas Intermediate crude (WTI) was at $78.79 per barrel, up by 0.14% on the day.

"With the US driving season almost upon us, high inflation may see consumers opt for shorter drives over the holiday period," analysts at ANZ Research said in a note on Friday, as Reuters reported.

The market is now looking toward U.S. economic data and indicators of future crude supply from the world's top producer.

The U.S. Federal Reserve held interest rates steady this week and flagged recent disappointingly high inflation readings that could make rate cuts take awhile in coming.

Geopolitical risk premiums due to the Israel-Hamas war, which had kept prices high due to global supply risks, are also fading, with Israel and Hamas considering a temporary ceasefire and holding talks with international mediators.

The London-listed firm reported first-quarter profit of $7.7 billion on Thursday.

Brent headed for a 6.3% weekly decline, while WTI moved towards a loss of 5.6% on the week.

The drop comes just weeks ahead of the next meeting of the Organization of the Petroleum Exporting Countries and allies led by Russia, together called OPEC+.

Three sources from OPEC+ producers said the group could extend its voluntary oil output cuts of 2.2 million barrels per day beyond June if oil demand fails to pick up, but the group has yet to begin formal talks ahead of the June 1 meeting.

Later on Friday, the U.S. Bureau of Labor Statistics will release its monthly nonfarm payroll report, which is a measure of the strength of the country's job market and is considered by the Fed when setting interest rates. Higher rates typically weigh on the economy and that can reduce oil demand.

Also on Friday, energy services firm Baker Hughes is due to release its weekly count of oil and gas rigs, an indicator of future crude output.

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