Oil prices rise slightly on Thursday morning after a heavy fall Wednesday of more than 5%, the biggest one-day drop in more than a year.

A barrel of the European reference oil, Brent, costs USD 86.40 on Thursday morning, compared to USD 87.70 on Wednesday afternoon. At the same time, US West Texas Intermediate (WTI) oil is trading at USD 84.68 against USD 86.01 Wednesday afternoon.

Oil prices fell sharply on Wednesday despite continued supply constraints. The Organization of the Petroleum Exporting Countries and its allies, OPEC+, maintains its agreed production cuts of 1 million barrels of oil per day for the rest of the year, while Russia maintains its voluntary export cut of 300,000 barrels per day for the remainder of the year.

”We continue to see the market in deficit through the fourth quarter and the softer prices reduce the probability OPEC will ease supply constraints,” writes National Australia Bank in a note to Reuters.

A weakened economy is pushing prices down, and the eurozone economy probably contracted in the third quarter. This was indicated by key figures on Wednesday, where the overall PMI index for the eurozone landed at 47.2 in September compared to 46.7 in August. A value below 50 indicates a decline, while a value above 50 indicates increasing activity.

The latest data also shows a big drop in US fuel demand. The US Energy Information Administration (EIA) reported on Wednesday that gasoline demand fell to around 8 million barrels per day last week. This is the lowest level since the start of 2023.

”Oil prices will struggle to push higher given the more uncertain demand outlook, along with weaker U.S. economic data released on Wednesday and a significant build in gasoline inventories,” Yeap Jun Rong, market strategist at IG, tells Reuters.

The US service industry slowed in September as new orders dropped to the lowest level in nine months, although the pace remained in line with expectations for solid economic growth in the third quarter.

(Translated using DeepL with additional editing by Kristoffer Grønbæk)