By Ambar Warrick
Investing.com -- Oil prices kept to a small range in early Asian trade on Wednesday as markets digested a slew of weak U.S. economic indicators, while signs of shrinking inventories and a recent OPEC production cut pointed to tighter supply.
Data from the American Petroleum Institute suggested that U.S. crude inventories shrank by 4.3 million barrels in the week to March 31, far more than expectations for a draw of 1.8 million barrels. The reading usually heralds a similar trend in government data due later in the day, and indicates some improvement in demand, particularly fuel consumption.
But this was largely offset by a string of weaker-than-expected economic readings this week, as data indicated a pronounced slowdown in global manufacturing activity through March. New orders for U.S.-manufactured goods shrank more than expected, while job openings fell to their lowest levels in two years.
Federal Reserve Bank of Cleveland President Loretta Mester also warned on Tuesday that even though the economy appeared to be slowing, the Fed was likely to keep raising interest rates to curb high inflation.
This tied into concerns that slowing economic growth will severely crimp oil demand this year, especially as major economies grapple with a potential recession.
Brent oil futures were flat at $85.35 a barrel, while West Texas Intermediate crude futures rose 0.4% to $81.03 a barrel by 20:25 ET (00:25 GMT).
Both contracts were up over 7% so far this week and were trading at multi-month highs after the Organization of Petroleum Exporting Countries and allies (OPEC+) unexpectedly announced an over 1 million barrel per day production cut.
But a rally in crude prices appeared to have stalled, with investors now awaiting more data for cues on economic health. Focus this week is now on U.S. nonfarm payrolls data for March, due on Friday, for any signs of further cooling in the jobs market.
Signs of a slowing economic rebound in major oil importer China also weighed on crude markets, as the country’s manufacturing sector struggled with steadily weakening demand.
This cast some doubts over whether a rebound in China will drive oil demand to record highs this year, given that manufacturing activity is usually a bellwether for the Chinese economy.