By Rowena Edwards
LONDON (Reuters) -Oil prices edged higher on Thursday after a price drop the previous day reversed the supportive impact of a surprise OPEC production cut announced this month.
was trading at $77.99 a barrel, up 30 cents, or 0.39%, at 0947 GMT, while U.S. West Texas Intermediate crude rose 22 cents or 0.3% to trade at $74.52.
Prices stabilised as Russian Deputy Prime Alexander Novak described oil markets on Thursday as balanced.
The OPEC+ group of leading oil producers does not see the need for further oil output cuts but is always able to adjust its policy, Novak said.
Oil prices had dropped almost 4% on Wednesday as jitters about a U.S. downturn overshadowed a larger-than-expected fall in inventories. [EIA/S]
U.S. capital goods spending fell more than expected in the latest data overnight, and weak risk sentiment spread from the banking sector following First Republic Bank (NYSE:)’s continued slump.
Analysts see weak refinery margins as a major contributor to the oil price decline, with Tamas Varga of oil broker PVM pointing to and gasoil 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 runs being cut and a further reduction in crude demand, said Ole Hansen, head of commodity strategy at Saxo Bank.
“For now, position adjustments will set the agenda but with an overall negative bias until refinery margins show signs of stabilizing,” Hansen said.
Markets will look for direction from the first quarterly print of euro zone gross domestic product growth, due on Friday. The data could impact monetary policy decisions by the European Central Bank, which holds a policy meeting on May 4.