New York — Oil prices inched higher on Tuesday on stronger global stock markets and expectations that OPEC and its allies will extend their supply curbs, but concerns about a global economic slowdown that could dent crude demand capped gains.
Brent crude futures gained 10 cents to $62.39 a barrel at 11:11 a.m. EDT (1511 GMT). U.S. West Texas Intermediate (WTI) crude futures rose 27 cents to $53.53 a barrel.
World shares rallied with U.S. equity markets trading higher on the back of easing trade tensions with Mexico and signs of more fiscal stimulus in China. Oil futures at times track with Wall Street.
Beijing said it will allow local governments to use proceeds from special bonds as capital for major investment projects, in a bid to support the slowing economy amid an escalating trade war with the United States.
“The energy complex has managed to largely reconnect with the equities this week but we are viewing this renewed correlation as tenuous given some increasingly bearish technical indicators spread across the oil spectrum,” Jim Ritterbusch of Ritterbusch and Associates said in a note.
Also supporting the market was optimism that the Organization of the Petroleum Exporting Countries and other producers such as Russia would extend an output cut deal that has been in place since the beginning of the year to prop up prices. The group, known as OPEC+, is due to meet in late June or early July to decide whether to extend the pact.
Russian energy minister Alexander Novak said on Monday there is still a risk that oil producers pump out too much crude and prices fall sharply, suggesting Moscow might support an extension. The comments, along with remarks from Saudi Arabia, bolstered expectations the deal will be renewed.
Russia’s average oil output stood at 11.04 million barrels per day (bpd) on June 1-10, up from an average of 10.87 million bpd on June 1-3, two sources familiar with official data said on Tuesday. Oil output in the first three days of June was the lowest since mid-2016, according to Reuters calculations.
While the talk of prolonged supply restraint is supporting prices, concern about slowing demand and economic growth has had a large impact on sentiment. Brent and WTI are down roughly 20% from their 2019 peak reached in April.
Energy consultancy FGE said global crude demand growth could drop below 1 million bpd in 2019 from the 1.3 to 1.4 million bpd expected previously.
Market participants await industry data on U.S. crude stockpiles, due out at 4:30 p.m. EDT (2030 GMT), that is expected to show inventories fell 500,000 barrels last week from nearly two-year highs.
Government data is due to be released Wednesday.
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