Brent futures fell 7 cents, or 0.1%, to $92.38 a barrel. West Texas Intermediate crude in the United States was down 21 cents, or 0.2%, to $87.06 per barrel.
“This week has placed growth risks back into the spotlight for oil prices, as the initial enthusiasm over OPEC+ production cuts has proved to be short-lived and gains are seen fading off,” said Jun Rong Yeap, market strategist at IG.
“While the OPEC+ production cuts may provide somewhat of a floor for oil prices, upside may seem limited as economic conditions will run the risks of further moderation as a trade-off to further Fed’s tightening process,” Yeap added.
Last week, the Organization of Petroleum Exporting Countries (OPEC) and its allies, notably Russia, pushed up prices by agreeing to cut supply by 2 million barrels per day (BPD).
However, OPEC trimmed its forecast for demand growth this year by 460,000 BPD to 2.64 million BPD on Wednesday, citing the return of China’s COVID-19 control measures and high inflation.
The US Energy Department reduced its forecasts for both domestic and global production and demand. It now predicts a 0.9% growth in US consumption in 2023, down from a 1.7% increase previously predicted. The department forecasts a 1.5% increase in global consumption, down from a 2% increase previously.
Weakening crude oil demand is adding to inventory buildup. According to Reuters, crude oil stocks in the United States increased by around 7.1 million barrels in the week ended October 7.
The energy market is also under pressure from the US dollar, which has risen significantly, notably against low-yielding currencies such as the yen.
The US Federal Reserve‘s commitment to keep raising interest rates in order to combat excessive inflation has lifted yields, making the US dollar more appealing to international investors.