Oil steady on Opec supply cuts, despite poor global economy

London — Oil steadied above $60 a barrel on Thursday, supported by a drop in US crude inventories and oil cartel Opec-led supply cuts, although worries about the global economy weighed.

US crude inventories fell by 2.7-million barrels last week, more than analysts expected. Still, the US Energy Information Administration also said petrol and distillate inventories rose.

Brent crude rose 15c to $60.45 a barrel by 8.58am GMT. US West Texas Intermediate (WTI) crude added 29c to $55.97.

Traders across the board are awaiting a speech from US Federal Reserve chair Jerome Powell on Friday in Jackson Hole, Wyoming that could indicate whether the central bank will continue to cut interest rates.

“Today prices are basically unchanged in the same relatively small range,” said Olivier Jakob of PetroMatrix. “The focus now is going to be on Jackson Hole, I think, to the end of the week.”

The price of Brent is up by 12% this year, supported by supply cuts led by Opec, and export cuts in Iran and Venezuela, which are under US sanctions.

On Wednesday, Iran said if its oil exports are cut to zero, international waterways would not have the same security as before, cautioning Washington against raising pressure on Tehran. But a slowdown in economic growth amid the US-China trade dispute and Brexit has been pressuring prices and forecasters, such as the International Energy Agency (IEA), have been lowering forecasts for world oil demand.

US President Donald Trump said on Wednesday that he was “the chosen one” to address trade imbalances with China, even as congressional researchers warned his tariffs would reduce US economic output by 0.3% in 2020.

The Jackson Hole speech is important for oil as signals from the Fed on monetary easing affect the dollar. A weaker US currency tends to support oil prices, and the dollar eased on Thursday against a basket of currencies. Analysts warned markets could be volatile.

Said Jeffrey Halley, analyst at Oanda, “With positioning in equities, bonds and energy all heavily weighted to this outcome, the resulting correction from a lack of Powell love could be both ugly and emotional.” 

Reuters