OPEC+ supply squeeze keeps oil prices afloat

April 10, 2023 (MLN): Oil prices remained steady on Monday as investors weighed the possibility of tighter supplies from OPEC+ producers starting in May, alongside concerns about a slowdown in global growth that could dampen fuel demand.

At the time of writing, Brent crude futures spiked 0.22% to $85.04 a barrel in the early Asia trading session, while U.S. West Texas Intermediate crude rose 0.24% to $80.69 a barrel.

Last week, both contracts rose for the third consecutive week after OPEC+ and their allies announced additional production cuts set to begin in May.

Saudi Arabia, leading the Middle East producers, will be reducing mostly sour crude supplies, it added.

Saudi Aramco, the state oil giant, increased its May crude prices to term customers in Asia and the United States after the announcement and informed several Asian customers they will receive full contract volumes in May despite the production cut.

The number of U.S. oil rigs fell by two to 590 last week, and gas rigs declined by two to 158, indicating that U.S. production is unlikely to increase in the near future, according to a report by Baker Hughes Co.

Investors are also keeping an eye on discussions between Iraq and Kurdistan to resume northern oil exports, which could add more sour crude to the global market.

The U.S. inflation report is set to be released on April 12, and it may help investors determine the short-term trajectory for interest rates.

Despite the recent banking crisis potentially prompting the Federal Reserve to slow down rate hikes, borrowing costs could still increase if inflation remains strong.

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