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Oil prices have been stuck in a tight range since erasing the gains of the Russian invasion of Ukraine at the end of last year. 

For most of last year, fears of a major oil supply shock from Russia dictated market sentiment and the positioning of traders. But oil prices didn't surge even after the EU embargoes and the G7 price caps on Russian crude oil and petroleum products came into effect.  

Russia is rerouting its oil exports to Asia, while Europe is buying more crude and products from the Middle East, Asia, and the United States. 

Yet, one of the most significant shifts in global oil trade in decades has not been the key driving force in oil markets in recent weeks. 

It's the economy. Inflation, manufacturing, employment, and business activity data from the United States and China - the world's two largest economies - are the primary drivers of the oil futures market now.

The Fed is closely watching every economic data point in the United States to gauge whether to accelerate or slow the pace of interest rate hikes. Stronger U.S. economic data and still high inflation could prompt the Federal Reserve to increase interest rates more than initially expected, raising the odds of a material slowdown and even recession in the coming months.  

On the other hand, the markets - including the oil futures market - are closely watching the economic trends in China, which has reopened from almost three years of zero-Covid lockdowns and is expected to see a rebound in economic growth and oil consumption this year.   

These two opposing economic forces are currently pulling the oil market in opposite directions, leaving prices stuck in a narrow $80-$85 range per barrel Brent

"Rangebound for months and in no hurry to change that amid a balanced flow of supply and demand related news, the market is likely to pay close attention to the general level of risk appetite which is currently being dictated by the FOMC and its close attention to incoming data," Saxo Bank said this week just before Friday's U.S. jobs report.  

Oil prices, adjusted for inflation, have now slumped by 40% in one year since  March 8, 2022, high, weeks after Russia invaded Ukraine, Reuters' senior market analyst John Kemp notes. Moreover, the price volatility in the front-month contract has dipped to an annualized rate of less than 25%, compared to 88% in March last year. 

The rate hikes and concerns about a potential slowdown in the U.S. economy are pulling oil prices down. 

"Decelerating growth continues to weigh on crude prices but if fears of a hard landing for the US economy are alleviated, WTI crude could find a home above the $80 a barrel," Ed Moya, Senior Market Analyst, The Americas at OANDA, said on Thursday. 

At the same time, expectations of a Chinese economic and oil demand rebound are limiting the downside. If China rebounds strongly after the reopening, prices could break above the recent tight range, considering that global inventories are below the five-year average and signs are emerging of a tighter physical crude market. 

In a soft landing for the U.S. economy, prices could soon hit $90 per barrel, some of the world's biggest physical traders of oil say. 

Trafigura expects prices to start rising due to the major shifts in oil trade over the past year, its co-head of oil trading Ben Luckock said at the CERAWeek energy conference this week. 

According to Luckock, the Chinese rebound is "for real," as Trafigura is seeing rising demand for minerals and metals and the volumes of crude oil China has imported over the past six weeks, the executive said, as carried by The Wall Street Journal. 

Oil prices could hit the $90-$100 per barrel range in the second half of this year as global demand is set to reach record levels while supply remains constrained, Russell Hardy, CEO at the world's largest independent oil trader, Vitol Group, told Bloomberg Television last week.   

While the Russian invasion of Ukraine and its impact on supply and the energy markets continues to hang over the oil market, the economies of the United States and China are dictating current price trends and will determine where prices will go when they break out of the current range.

By Tsvetana Paraskova for

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Tsvetana Paraskova

Tsvetana is a writer for with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.  More