The calmer start of the week follows last week’s 7% spike in prices - most of which took place on Monday - after OPEC+ announced additional production cuts that would bring the total curbs to 3.6 million bpd.
Currently, according to Bloomberg, traders are busy assessing the impact of the announcement on global oil supply. These may become a bit clearer later this week when OPEC and the International Energy Agency release their new monthly oil market reports.
Bloomberg also noted that Russia’s oil production had reportedly fallen by 700,000 bpd instead of the announced 500,000 bpd in March but added that data on refinery inputs and exports was inconsistent with the first figure.
“Economic data will form a key input this week for energy markets,” Charu Chanana, market strategist for Saxo Capital Markets, told Bloomberg. “Given that the OPEC decision was partly intended to drive out short sellers from the crude oil market, oil prices may be better able to reflect market fundamentals.”
"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," the head of ING’s commodity research, Warren Patterson, told Reuters.
Meanwhile, additional constraints on supply come from Iraq, where shipments of crude from Kurdistan have yet to restart. On the other hand, more weak economic data from the United States this week would intensify pressure on prices.
The March CPI report is due out on Wednesday and if it shows higher inflation still, it could lower prices despite the growing supply concerns. A poll by Reuters has suggested this won’t be the case and inflation cooled off to 5.2% in March from 6% in February.
By Irina Slav for Oilprice.com
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