Crude oil prices edge higher due to supply concerns

10 Apr 2023 , 09:41 AM

The possibility of tighter supplies from OPEC+ producers starting in May  pushed up oil prices in early Asian trade on Monday, but worries over the future of the global economy restrained gains.

Brent crude futures were up 13 cents, or 0.2%, to $85.25 per barrel, while U.S. West Texas Intermediate crude was up 14 cents, or 0.2%, to $80.84 per barrel.

After the Organization of the Petroleum Exporting Countries and their allies shocked markets by announcing additional production cuts that will begin in May, both futures increased for a third straight week last week, returning to levels last seen in November.

The so-called OPEC+ group will primarily reduce Middle Eastern producers’ supplies of sour oil.

Following the news, the world’s top producer Saudi Arabia increased the price of its May crude for long-term buyers in Asia and the US.

Investors are also keeping an eye on the development of the negotiations between Iraq and Kurdistan to resume northern oil shipments, which might increase the supply of sour crude on the world market.

According to a Baker Hughes Co report on Thursday, the number of U.S. oil rigs decreased by two to 590 last week while gas rigs decreased by two to 158, further boosting prices and indicating that U.S. production won’t be increasing anytime soon.

The much anticipated U.S. inflation report due out this week may aid investors in determining the trajectory of interest rates in the near future.

The recent banking crisis raised hopes that the Federal Reserve could scale back rate increases, but analysts warned that if inflation remained high, borrowing costs may still rise.

Sharp rate increases have strengthened the dollar, increasing the cost of commodities like oil for investors holding other currencies.

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