Oil Prices Dip Despite Saudi Arabia and Russia’s Supply Cuts Oil prices dropped on Monday, settling down 1% despite attempts by Saudi Arabia and Russia to reduce global supplies. Worries over a slowing global economy and possible U.S. interest rate hikes offset the supply cuts that Saudi Arabia and Russia announced for August. Brent crude futures closed at $74.65 a barrel, while U.S. West Texas Intermediate crude settled at $69.79. Saudi Arabia said it would extend its voluntary cut of one million barrels per day (bpd) for another month. However, business surveys showed that global factory activity slumped in June, and U.S. inflation has continued to outpace the central bank’s 2% target, sparking fears of more rate hikes.
Russia, alongside Saudi Arabia, is seeking to tighten global crude supplies and increase prices. As of now, the cuts from OPEC+ oil producers total 5.16 million bpd. Oil prices had dropped from $113 a barrel a year ago due to concerns of an economic slowdown and ample supplies. Despite these challenges, investors made it clear they expect tighter oil balance during the second half of the year, suggesting that a recession may be avoided. PVM analyst Tamas Varga said, “They expect tighter oil balance and buoyant equities also suggest that recession will be avoided, albeit probably narrowly.” It’s yet to be seen if Saudi Arabia and Russia’s supply cuts will be enough to propel oil prices higher or if global economy concerns persist.
In either case, the oil market is remaining vigilant and monitoring market conditions. Oil Prices Dip Despite Saudi Arabia and Russia’s Supply Cuts Oil prices fell on Monday, settling by 1%, despite announcements by top exporters Saudi Arabia and Russia to reduce supply. Worries of a slowing global economy and possible U.S. interest rate hikes outweighed the cuts, leading prices to go down. Brent crude futures finished the day at $74.65 a barrel, while U.S. West Texas Intermediate crude settled at $69.79. Saudi Arabia said they would extend their voluntary cut of one million barrels per day (bpd) for another month in August.
Fears of a further economic slowdown and demand for fuel has grown as U.S. inflation has continued to outpace the central bank’s 2% target. Meanwhile, in attempts to tighten global supplies and raise prices, Russia pledged to reduce oil exports by 500,000 bpd in August. This brings the total pledged by OPEC+ oil producers to 5.16 million bpd.
However, these cuts seem to be not enough to counter the sluggish demand, ample supplies, and economic slowdown. Despite these challenges, investors seem to remain bullish, believing that tighter oil balance will be seen in the second half of the year, suggesting that a recession may be avoided. PVM analyst Tamas Varga commented, “They expect tighter oil balance and buoyant equities also suggest that recession will be avoided, albeit probably narrowly.” The oil market is remaining watchful and keeping a close eye on market conditions to determine the potential impact of Saudi Arabia and Russia’s supply cuts.
Source: Reuters
