Oil steadies as market digests supply and demand outlook

Oil prices were little changed on Thursday as the market digested tighter crude supply alongside fears of global economic slowdown.

Brent crude futures edged up 12 cents to $76.77 a barrel by 1143 GMT after a 0.5% gain the previous day.

U.S. West Texas Intermediate crude firmed by 19 cents to $71.98 after rising by 2.9% in post-holiday trade on Wednesday to catch up with Brent’s gains earlier in the week.

On the supply side, top oil exporters Saudi Arabia and Russia announced a fresh round of output cuts for August. The total cuts now stand at more than 5 million barrels per day (bpd), equating to 5% of global oil output.

The cuts, along with a bigger than expected drop in U.S. crude stocks, provided some support for prices.

“The oil balance will likely tighten and so will financial conditions, judging by the Fed minutes released last night,” said PVM analyst Tamas Varga.

“Persistent recession worries will probably encumber, but not prevent, oil from marching higher.”

The market has been expecting interest rates in the U.S. and Europe to rise further to tame stubbornly high inflation while fears of a global recession have been heightened by recent surveys showing that factory and services activity in China and Europe has slowed.

Minutes released on Wednesday showed that a united U.S. central bank agreed to hold rates steady at its June meeting to buy time and assess the need for further hikes, even though most attendees expected they would eventually need to tighten policy further.