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Brent crude futures were up 43 cents, or 0.5%, to $85.36 a
barrel by 0925 GMT. U.S. West Texas Intermediate (WTI) crude
futures were trading at $80.89 a barrel, up 47 cents, or 0.6%.
Both benchmarks jumped more than 6% on Monday after the
Organization of the Petroleum Exporting Countries and allies
including Russia, collectively known as OPEC+, rocked markets
with Sunday's announcement of voluntary production cuts of 1.66
million barrels per day (bpd) from May and until the end of
2023.
The latest pledges bring the total volume of cuts by OPEC+ to
3.66 million bpd including a 2 million barrel cut last October,
equal to about 3.7% of global demand.
"Oil prices can easily rise above $100 a barrel," Fereidun
Fesharaki of consultancy FGE said.
"Our forward balances show a very steep draw in inventories
through end 2023," he added.
The OPEC+ production curbs led most analysts to raise their
Brent oil price forecasts to around $100 per barrel by year-end.
Goldman Sachs lifted its forecast for Brent to $95 a barrel by
the end of this year, and to $100 for 2024.
"The motivation behind the cut ... is not clear from the very
limited public statements that have been made," Callum
Macpherson, head of commodities at Investec, said.
"It may be due to concerns about the spill over of equity recent
market volatility into oil prices or because members perceive a
weakness in the physical market that is not apparent to the
wider market," he added.
The news added to investor worries about higher costs for
businesses and consumers, raising fears an inflationary jolt to
the world economy from rising oil prices will result in more
rate hikes.
Market watchers have been trying to gauge how much longer the
U.S. Federal Reserve may need to keep raising interest rates to
cool inflation, and whether the U.S. economy may be headed for
recession.
U.S. manufacturing activity slumped to the lowest level in
nearly three years in March and could decline further on tighter
credit and higher borrowing costs.
(Additional reporting by Yuka Obayashi in Tokyo and Andrew
Hayley in Beijing, Editing by Louise Heavens)
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