Last updated: July 05, 2023, 02:07 AM IST
New York, United States of America (USA)
US markets were closed on Tuesday for the Independence Day holiday. (Photo: Reuters)
Oil benchmarks fell about 1% in the previous session as gloomy macroeconomic outlook wiped out early gains
Oil prices rose 2% on Tuesday as markets weighed supply restrictions in August by top exporters Saudi Arabia and Russia against the weak global economic outlook.
Saudi Arabia said on Monday it would extend its voluntary 1 million barrels per day (bpd) production cut until August, while Russia and Algeria would voluntarily cut their production and export levels for August by 500,000 barrels per day and 20,000 barrels per day, respectively.
If fully implemented, that would yield a combined reduction of 5.36 million barrels per day from August 2022 – possibly even more as several countries in the OPEC+ producer group fail to meet their production quotas, said PVM analyst Tamas Varga.
Total cuts now exceed 5 million barrels per day, or 5% of global oil production.
On Tuesday, Brent crude oil futures rose $1.60 to $76.25 a barrel. US West Texas Intermediate Crude Oil traded $1.44 higher at $71.23.
“It is clear that the Saudis are taking proactive and pre-emptive measures to stabilize crude oil prices and see gains of $80 a barrel to support their domestic budgets,” said Andrew Lipow, president of Lipow Oil Associates in Houston.
Still, the market will wait to verify Russia’s announced cuts, and concerns remain that high interest rates will depress global demand, Lipow said.
Oil benchmarks fell about 1% in the previous session as gloomy macroeconomic prospects wiped out early gains.
US markets were closed on Tuesday for the Independence Day holiday.
Despite Monday’s announcements, little has changed in oil dynamics, said OANDA analyst Craig Erlam. “Only a significant break above $77 will suggest that something has changed, otherwise trading could continue within a range.”
Business surveys have shown a slump in global manufacturing activity due to weak demand in China and Europe, and US production also fell further in June to levels last recorded during the first wave of the COVID-19 pandemic.
This broader uncertainty is likely to overshadow OPEC+’s efforts to tighten supply, some analysts say.
Even before the latest cut announcements, data from the International Energy Agency (IEA) suggested the oil market would show a supply shortfall of about 2 million barrels per day in the third and fourth quarters, Commerzbank analysts said.
Oil prices did not rise significantly in the news, largely due to demand concerns over China’s sluggish economic recovery after the lifting of pandemic restrictions.
Meanwhile, interest rates in the US and Europe are expected to rise further to address persistently high inflation, the analysts said.
(This story has not been edited by News18 staff and was published from a syndicated news agency feed – Reuters)
