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Oil prices began the week’s trade with a slight loss before bullish and bearish factors reached something of a balance.
Brent crude was trading at $82.66 per barrel at the time of writing, and West Texas Intermediate was at $75.94 per barrel, both down by less than a percentage point from Friday’s close.
Last week, Russia was reported to have plans to reduce crude oil exports from its western ports by as much as 25% next month. This prompted expectations of tighter global supply, especially since the report came soon after an official statement that the country’s oil production would be reduced by half a million barrels per day in March.
Meanwhile, the U.S. Energy Information Administration continued to report sizeable weekly builds in crude oil inventories, which have now returned to levels above the five-year average after slipping below it last year.
As well as inventory builds, the Federal Reserve looks to be committed to more interest rate hikes as it seeks to put a lid on inflation. Rate hikes tend to push the dollar higher, depressing oil prices as the expensive dollar affects demand adversely.
"Oil looks like it wants to stay in a trading range until we have a clearer outlook with China's COVID reopening and on how bad of a recession the Fed will induce for the U.S. economy," OANDA senior analyst Edward Moya told Reuters earlier today.
Signs of recovery are coming from China, with consumption on the rise after the relaxation of zero-Covid rules. However, industrial activity is not rebounding in step with consumption, Bloomberg reported earlier today.
Analysts and traders will now be watching the next China PMI release, due out on Wednesday. If it confirms a rebound, oil prices will almost certainly move higher, in line with most forecasts.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com