Oil drifts higher after wiping out all OPEC-driven gains

Oil prices rose slightly on Thursday, but were nursing sharp losses for the week as fears of slowing economic growth largely offset signs of tightening U.S. supplies, with focus now turning to key economic data due later in the day.

Steep losses over the past two sessions saw oil prices erase all gains made on the back of a surprise production cut by the Organization of Petroleum Exporting Countries and allies (OPEC+). Prices were now trading close to a one-month low, and were below the $80 a barrel level that was targeted by the OPEC.

Strong oil exports from OPEC+ member Russia also saw markets question the true depth of the production cut.

Brent oil futures rose 0.3% to $77.96 a barrel, while West Texas Intermediate crude futures rose 0.3% to $74.49 a barrel by 00:22 ET (02:22 GMT). Both contracts were trading down over 4% for the week.

The OPEC had unexpectedly cut production by over 1 million barrels a day earlier this month, in a bid to support battered oil markets. While the move had briefly pushed crude to near $90 a barrel, prices swiftly reversed those gains in recent weeks.

Fears of slowing economic growth, which could in turn dent oil demand, were the biggest weights on crude prices, as a string of weak economic data and corporate earnings pushed up concerns over a U.S. recession this year.

Investors were now seeking more cues on that front from first quarter U.S. GDP data due later in the day. The reading is expected to show that economic growth cooled after a stronger-than-expected fourth quarter, amid pressure from high interest rates and relatively high inflation.

Markets also awaited data on the Federal Reserve’s preferred inflation gauge – the personal consumption expenditures price index – which is expected to show that inflation remained sticky in March. The reading is due later on Thursday.

Strength in the dollar, amid uncertainty over U.S. monetary policy, also weighed on crude prices this week, as markets positioned for a 25 basis point rate hike by the Fed in the coming week. A slew of Fed officials also called for more rate hikes after May, given that inflation is still trending well above the central bank’s 2% target.

Uncertainty over economic growth and monetary policy largely offset signs of tightening U.S. supply, as data on Wednesday showed that U.S. crude inventories shrank by a bigger-than-expected margin in the week to April 21.