Oil makes a comeback from 3-day downtrend

Business a.m.

Oil prices rebounded on Thursday, with Brent crude futures rising by 92 cents or 1.1 percent to $82.82 a barrel, while U.S. West Texas Intermediate crude (WTI) futures rose 97 cents or 1.3 percent to $78.54. This recovery followed three consecutive days of losses, with both benchmarks experiencing over a 1% decline on Wednesday.

The market’s rebound comes despite the U.S. Federal Reserve’s recent discussion on potentially raising interest rates to combat inflation. According to the Fed’s minutes, “various participants mentioned a willingness to tighten policy further should risks to inflation materialize in a way that such an action became appropriate.”

Higher interest rates could affect oil demand by raising borrowing costs and slowing economic growth in the world’s largest oil-consuming nation. Additionally, an unexpected rise in U.S. crude stocks by 1.8 million barrels last week, reported by the Energy Information Administration (EIA), further contributes to market uncertainty. 

Despite these challenges, oil prices have managed to recover slightly as the market continues to navigate the delicate balance between inflation control and economic growth. However, investors will closely monitor the Federal Reserve’s actions and their potential impact on oil demand and prices.

UBS analyst Giovanni Staunovo anticipates Brent crude oil reaching $91 a barrel in the coming months due to persistent market undersupply, robust demand, and OPEC+ countries’ efforts to maintain market balance. Staunovo’s projection comes amid recent developments in OPEC+ production quotas, including Russia’s announcement of exceeding its quota in April.

Russia attributes the production quota error to “technical reasons” and has stated its intention to present a compensation plan to the Organization of the Petroleum Exporting Countries (OPEC) secretariat. The OPEC+ alliance, comprising OPEC and non-OPEC partners led by Russia, is set to convene on June 1 to discuss future production cut levels.