Stability of Oil Prices as Investors Shift Focus to Demand Outlook

Oil prices stabilized in early Asian trading on Tuesday after the OPEC+ decision to cut production further shook the markets yesterday, while investors turned their attention to demand outlook and the impact of rising prices on the global economy. Brent crude futures fell by two cents to $84.91 a barrel by 0029 GMT, while West Texas Intermediate crude futures reached $80.47 a barrel, up five cents. Both benchmark crude prices spiked by more than 6 percent on Monday after the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, known as OPEC+, shocked the markets by announcing on Sunday plans to reduce production targets by an additional 1.16 million barrels per day. The recent commitments raise OPEC+'s total production cuts to 3.66 million barrels per day, including two million barrels in October, according to Reuters calculations, which is equivalent to about 3.7 percent of global demand. Hiroyuki Kikukawa, head of Nissan Securities' N.S. Trading, noted that "the buying wave triggered by the OPEC+ decision to cut production (in anticipation of a significant price increase) has calmed, and market interest has shifted to future demand projections." He predicted that demand would rise "due to the summer driving season, but high oil prices may increase inflationary pressures and prolong interest rate hikes in many countries, which could weaken demand."