Oil prices were steady on Wednesday ahead of a U.S. holiday, after a steep fall the previous session when worries about a slowing global economy outweighed a decision by OPEC and allies to extend crude output cuts. Prices rose early, then pared most gains after data showed U.S. crude inventories fell by 1.1 million barrels in the latest week, a much smaller decline than the 3 million barrel decrease analysts had expected. “The market is disappointed by a very small crude oil inventory draw … the only sign of strength in the market is the continued modest decline of gasoline inventories” said Andrew Lipow, president at Lipow Oil Associates in Houston. U.S. crude imports rebounded while exports fell sharply from a record 3.8 million barrels per day (bpd) a week earlier, analysts said. “We had a pretty sharp correction yesterday so after that, a little rebound is expected. Globally, the market is concerned about oil demand growth potential,” Olivier Jakob of Petromatrix consultancy said. Trading volumes were subdued ahead of the U.S. Fourth of July holiday on Thursday. Some 450,892 lots of the front-month U.S. crude futures contract were traded, about half of the previous session’s volume.

On Tuesday, the Organization of the Petroleum Exporting Countries and other producers such as Russia, a group known as OPEC+, agreed to extend oil supply cuts until March 2020. “Extending the cut by six or nine months, it doesn’t really matter if the level stays the same,” Jakob said. “If you (OPEC) really wanted to target stock levels, you would need deeper cuts but Saudi Arabia has already gone beyond its cut target.” The OPEC+ agreement should draw down oil inventories in the second half, boosting oil prices, analysts from Citi Research said in a note. “Keeping cuts through the end of 1Q aims to avoid putting oil into the market during a seasonal low for demand and refinery runs,” they said. Still, signs of a global economic slowdown hitting oil demand worried investors after global manufacturing indicators disappointed and the United States threatened Europe with more tariffs.

The U.S. trade deficit jumped to a five-month high in May and the ADP National Employment Report showed private payrolls increased far less than economists had expected. Barclays expects oil demand to grow at its slowest pace since 2011. Morgan Stanley lowered its long-term Brent price forecast to $60 per barrel from $65 per barrel, and said the oil market is broadly balanced. Crude prices also were pressured by signs of a recovery in oil exports from Venezuela in June and growth in oil production in Argentina in May. “That’s a bad combination for US inventories. It’s bearish,” said John Kilduff of Again Capital.

The Organization of the Petroleum Exporting Countries and other producers such as Russia, a group known as OPEC+, agreed on Tuesday to extend oil supply cuts until March 2020 as members overcame differences to try to prop up prices. “We had a pretty sharp correction yesterday so after that, a little rebound is expected. Globally, the market is concerned about oil demand growth potential,” Olivier Jakob of Petromatrix consultancy said. “Extending the cut by six or nine months, it doesn’t really matter if the level stays the same. If you (OPEC) really wanted to target stock levels, you would need deeper cuts but Saudi Arabia has already gone beyond its cut target.”

Ahead of government data due later on Wednesday, industry group the American Petroleum Institute (API) said that U.S. crude inventories fell by 5 million barrels last week, more than the expected decrease of 3 million barrels. The OPEC+ agreement to extend oil output cuts for nine months should draw down oil inventories in the second half of this year, boosting oil prices, analysts from Citi Research said in a note. “Keeping cuts through the end of 1Q aims to avoid putting oil into the market during a seasonal low for demand and refinery runs,” they said. Still, signs of a global economic slowdown hitting oil demand growth worried investors after global manufacturing indicators disappointed and the United States opened another trade front after threatening the EU with more tariffs.

Barclays expects demand to grow at its slowest pace since 2011, gaining less than 1 million barrels per day year-on-year this year. Morgan Stanley, meanwhile, lowered its long-term Brent price forecast on Tuesday to $60 per barrel from $65 per barrel, and said the oil market is broadly balanced in 2019. Crude prices were also capped by signs of a recovery in oil exports from Venezuela in June and growth in oil production in Argentina in May. Both benchmarks fell more than 4% on Tuesday as worries about a slowing global economy. The Organization of the Petroleum Exporting Countries and other producers such as Russia, a group known as OPEC+, agreed on Tuesday to extend oil supply cuts until March 2020 as members overcame differences to try to prop up prices.

Have a Great July 4th,