By Peter Nurse
Investing.com -- Oil prices weakened Thursday, with growing fears that the U.S. economy will fall into recession later this year causing traders to bank profits after recent gains.
By 08:30 ET (12:30 GMT), U.S. crude futures traded 0.4% lower at $82.97 a barrel, while the Brent contract fell 0.4% to $87.00 a barrel.
Both benchmarks had risen 2% on Wednesday to their highest in more than a month as cooling U.S. inflation spurred hopes that the U.S. Federal Reserve will stop raising interest rates.
However, minutes from the Fed's last policy meeting suggested that the policymakers were concerned that stress in the banking sector would tip the U.S. economy into a mild recession, with the drop in economic activity likely to hit oil demand at the largest consumer in the world.
That said, the crude market has been underpinned by strong trade data out of China, the world’s largest crude importer, suggesting that the Asian economic giant is quickly recovering from the slowdown caused by its prolonged adherence to severe COVID restrictions, only lifted late last year.
China’s crude oil imports surged to 12.4 million barrels a day in March, up from 10.7 million barrels in February and the largest volume seen since June 2020.
Comments from the U.S. energy secretary have provided further support to the market, with Jennifer Granholm stating that the U.S. administration would look to start refilling the heavily drawn-down Special Petroleum Reserve this year if it is advantageous to taxpayers.
That said, “Given that we see higher prices throughout the year, this means it is unlikely that the refill will happen this year,” ING said.
Adding to the positive news, the latest monthly report from the Organization of Petroleum Exporting Countries stated that the cartel’s supply cuts, agreed upon earlier this month, will mean that the global market is likely to suffer from a hefty supply deficit as the year progresses.
World markets may be under-supplied by about 2 million barrels a day in the fourth quarter as a result of cutbacks, according to the OPEC report.
The group continues to forecast a substantial jump in global oil demand this year, estimating that consumption will climb by 2.3 million barrels a day, surpassing pre-pandemic levels to reach a record 101.89 million a day.