LONDON: Brent crude oil prices steadied after early declines on Tuesday, supported by better than expected business activity data as well as supply curbs and hopes for a Chinese demand recovery.
Buoyant services growth meant the recovery in euro zone business activity gathered steam this month, a survey showed on Tuesday, pointing to a less gloomy European economic outlook than previously feared. A sister survey showed businesses in Britain reporting an unexpected bounce in activity.
Global benchmark Brent crude was down 26 cents, or 0.3%, at $83.81 a barrel at 1152 GMT. U.S. West Texas Intermediate crude for March, which expires on Tuesday, was up $1.02 at $77.36.
Looking into 2023, oil demand is set to exceed supply, said Tamas Varga of oil broker PVM.
“After a turbulent 2022 it seems increasingly plausible that the global economy will avoid recession, interest rates will peak some time during the summer, global oil consumption will gradually increase whilst oil supply will struggle to keep up with the rise in demand,” he said.
The U.S. crude contract did not settle on Monday because of a public holiday in the United States. As a result, the weekly American Petroleum Institute report on U.S. inventories will be out on Wednesday rather than the usual Tuesday.
Wider financial markets, meanwhile, will focus on Wednesday’s release of minutes from the U.S. Federal Reserve’s latest meeting after recent data raised the likelihood of interest rates remaining higher for longer.
On Monday oil prices rose by more than 1% on optimism over Chinese demand, which analysts expect to rebound this year after COVID-19 curbs were scrapped.
Brent is at the middle of the trading range since late December, between $78 and $88 a barrel, with some investors taking profits on concern over U.S. interest rates while others are more bullish on hopes for a demand recovery in China, said Rakuten Securities analyst Satoru Yoshida.
Signs of tighter supply also lent prices some support.
Russia plans to cut oil production by 500,000 barrels per day, or about 5% of its output, in March after the West imposed price caps on Russian oil and oil products over the invasion of Ukraine.
Russia is part of the OPEC+ producer group comprising the Organization of the Petroleum Exporting Countries (OPEC) and allies, which agreed in October to cut oil production targets by 2 million bpd until the end of 2023.