Oil stabilizes as tight supply counterbalances growth concerns

Following three consecutive weeks of growing prices, oil prices remained steady on Monday, as looming supply cuts from Saudi Arabia and other OPEC+ producers counterbalanced concerns about a weakening global economy that could dampen fuel demand in the short term.

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The price of crude oil surged more than 6% last week after OPEC+, the Organization of Petroleum Exporting Countries (OPEC), and allies including Russia, shocked the market with an announcement that a new round of production cuts will begin in May.

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At 10:00 GMT on Monday, Brent crude oil rose 18 cents, or 0.2%, to $85.30 per barrel, while U.S. West Texas Intermediate crude rose 11 cents to $80.81 per barrel.

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"Bearish investors are now questioning the demand outlook in light of the price cuts, while bullish investors can expect a tighter market over the second half of the year as a result of the price cuts," ING's head of commodities research Warren Patterson said.

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"Although I am in the latter camp, I still see prices moving higher from here as time goes on as we go through the rest of the year."

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The shutdown of Iraq's northern exports has added to the tightness in the supply of goods in the country. Last week, an agreement was signed to restart the flow of oil, but as of Thursday, the flow still hadn't been resumed.

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In addition, the price of oil is supported by a steeper-than-expected drop in U.S. crude inventories last week, along with a downward trend in gasoline and distillate inventories, which suggests that demand for oil is on the rise.

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Investors may be able to judge the near-term trajectory of interest rates based on the U.S. inflation report due to be released on Wednesday, which is expected to have a significant impact on global financial markets.

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"The U.S. data released this week could be a drag on sentiment if strong numbers reinforce expectations that the Fed will continue to tighten its monetary policy, while weak numbers suggest the economy is suffering, which means risk-aversion is increasing," according to Vandana Hari, the founder of Vanda Insights, an oil market analysis provider.

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It is also expected that there will be monthly reports from OPEC on Thursday and the International Energy Agency on Friday, which will provide an update on oil demand and supply forecasts.