By Ambar Warrick
Oil prices inched higher on Monday as hopes of a supply cut by the OPEC offset heightened concerns over an economic slowdown forecast by the U.S. Federal Reserve.
Crude prices strengthened last week after Saudi Arabia, which heads the Organization of Petroleum Exporting Countries (OPEC), said that it could cut supply at any time to help stabilize crude prices.
The comments came in the face of the potential lifting of U.S. sanctions on Iran, which could release a large amount of crude supply into the market.
Reassurances of supply cuts by OPEC and its allies also helped crude prices avoid a broader slump in financial markets, after Fed Chair Jerome Powell warned that the U.S. is likely headed for an economic slowdown, due to rising interest rates and overheated inflation.
Stock and currency markets plummeted after Powell’s comments.
Crude markets were also supported by recent data showing that demand in some economies may be recovering.
Data showed the U.S. exported oil at a record pace earlier this month, while easing gas prices also pointed to a recovery in fuel demand. U.S. crude inventories have also fallen by a bigger-than-expected pace in the past two weeks.
European crude demand is set to heat up this year as the bloc weans itself off Russian natural gas imports. Rising natural gas prices, as a result, are likely to spur more crude use for heating.
But gains in the dollar, following Powell’s comments, limited the upside for crude. A stronger dollar raises the cost of fuel for countries that import oil.
Ongoing negotiations between Washington and Tehran over reviving the nuclear deal are also expected to keep crude markets on edge.
In Asia, slowing economic growth in China could likely weigh on crude prices, given that the country is the world’s largest importer. Data last week showed that industrial activity in the country has been severely impacted by a series of COVID-19 lockdowns this year.