NEW YORK: Oil prices inched lower on Wednesday, despite greater than expected draws in US crude oil and fuel stocks, as the market weighed worsening economic prospects against expectations of US crude inventory declines and plans by OPEC+ producers to reduce output.
Brent crude futures fell 49 cents, or 0.6%, to $84.45 a barrel by 10:58 a.m. EDT (1558 GMT). West Texas Intermediate US crude fell 58 cents, or 0.7%, to $80.13 a barrel.
Crude inventories fell by a more-than-expected 3.7 million barrels in the last week to 470 million barrels, the Energy Information Administration said on Wednesday.
Gasoline and distillate stocks also fell by 4.1 million barrels and 3.6 million barrels, respectively.
“Maybe following the strong price rally this week, investors are a bit cautious on jumping on a strong report,” said UBS analyst Giovanni Staunovo.
Data showing cooling economic conditions weighed against higher demand for crude and fuel.
US job openings in February dropped to the lowest level in nearly two years, suggesting that the labor market was cooling.
“(The data) could be the first signs of weakness in the US labor market and that is huge. Without it, (the US Federal Reserve) will find it very hard to make the argument that it is pausing the tightening cycle,” said Craig Erlam, senior markets analyst at OANDA.
Traders will be looking for cues on broader economic trends from US non-farm payrolls data due this week, as weak economic data from the US and China raise demand fears.
“The present raises concerns about healthy economic expansion as Chinese, euro zone and US manufacturing activity slowed last month,” said Tamas Varga of oil broker PVM.
Record Russian diesel flows to the Middle East in March and the sluggish performance of middle distillates contracts have “acted as a brake on any attempt to push crude oil prices meaningfully higher”, Varga said.
This week prices were underpinned by voluntary cuts pledged by OPEC+ which groups Organization of the Petroleum Exporting Countries members and allies including Russia.
“The decision by OPEC+ to voluntarily cut crude supplies from May onwards has come as a surprise to many, considering that the global crude balance was already expected to become increasingly tight over the summer months, something that will certainly help keep crude prices supported,” Kpler crude analyst Johannes Rauball said.