By Stephanie Kelly
NEW YORK (Reuters) – Oil prices steadied on Thursday, paring some losses from the previous session, after Russia said OPEC+ sees no need for further output cuts.
Russian Deputy Prime Minister Alexander Novak described oil markets as balanced. Russia is part of the OPEC+ group of oil-producers that announced a combined reduction of around 1.16 million barrels per day earlier this month, a surprise decision the U.S. described as unwise.
OPEC+ does not see the need for further oil output cuts but is always able to adjust its policy, Novak said.
Brent crude futures rose 64 cents to $78.33 a barrel by 1:05 p.m. EDT (1705 GMT). West Texas Intermediate crude rose 60 cents to $74.90.
The benchmarks dropped almost 4% on Wednesday as jitters about a U.S. economic downturn overshadowed a larger-than-expected fall in U.S. crude inventories.
Investors are watching economic data for any directional cues on energy demand.
U.S. economic growth slowed by more than expected in the first quarter, although jobless claims fell in the week ending April 22, data showed.
“It’s kind of a mixed bag on interest rates, and oil doesn’t know how to take that right now,” said Phil Flynn, an analyst at Price Futures Group.
On Wednesday, U.S. data showed capital goods spending fell more than expected. Oil prices were also pressured as weak risk sentiment spread from the banking sector after First Republic Bank’s continued slump.
Analysts see weak refinery margins as a major contributor to the recent oil price decline, with oil broker PVM’s Tamas Varga pointing to heating oil and gas oil as “the main possible culprit for the outsized weakness”.
“Inventories in this product are somewhat reluctant to deplete, possibly due to resilient Russian exports,” Varga said.
Russia has increased exports of refined products despite an EU embargo and oil price cap, sources told Reuters.
Falling refinery profit margins could lead to cuts in runs and a further reduction in crude demand, said Ole Hansen, head of commodity strategy at Saxo Bank.
Backwardation in the Brent futures curve has flattened to just above $2.00 per barrel, having touched $4 a barrel on April 12.
Backwardation, when prices for the front-month contract are higher than contracts for later months, typically indicates tight supply.
Markets will look for direction from the first quarterly print of euro zone gross domestic product growth, which is due on Friday. The data could affect monetary policy decisions by the European Central Bank when it meets on May 4.
(Reporting by Stephanie Kelly in New York ; Additional reporting by Rowena Edwards in London, Sudarshan Varadhan in Singapore and Katya Golubkova in Tokyo; Editing by Marguerita Choy and David Gregorio)
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