Despite supply cuts, global economic slowdown fears and potential rate hikes trigger an oil price slump
05 July 2023 - 07:15
by Agency Staff
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Tokyo — Oil prices eased on Wednesday, paring the previous day’s gain as fears over a global economic slowdown denting fuel demand outweighed expectations of tighter supply due to output cuts announced by top exporters Saudi Arabia and Russia for August.
Brent crude was down 14c, or 0.2%, at $76.11 a barrel by 12.27am GMT, after climbing $1.60 on Tuesday.
US West Texas Intermediate (WTI) crude futures were at $71.14 a barrel, up $1.35, or 1.9%, from Monday’s close, having traded through a US holiday to mark Independence Day without a settlement.
“Oil prices came under pressure again due to lingering worries over a slowdown in the global economy and further hikes of interest rates in the US and Europe,” said Tomomichi Akuta, senior economist at Mitsubishi UFJ Research and Consulting.
“The market will likely continue to move back and forth for some time, focusing on economic indicators in China and monetary policy by central banks,” he said, predicting Brent would trade about $75 a barrel.
Saudi Arabia, the world’s biggest crude exporter, on Monday said it would extend its voluntary output cut of 1-million barrels per day (bpd) to August, while Russia and Algeria volunteered to lower their August output and export levels by 500,000 bpd and 20,000 bpd, respectively.
The move only briefly lifted the market. The latest decision by Saudi Arabia and Russia could be viewed as a bearish signal for prices, as it confirms that optimistic views on demand growth are faltering.
Opec+, a group comprising the Organization of the Petroleum Exporting Countries and allies including Russia that pumps around 40% of the world’s crude, has been cutting oil output since November in the face of flagging prices.
Investors remained concerned about oil demand, however, after business surveys showed a slump in global factory activity because of sluggish demand in China and in Europe.
Traders will be looking for demand cues from industry data on US crude and product inventories from the American Petroleum Institute (API) later on Wednesday and government data on Thursday, both delayed by a day due to the US holiday.
US crude inventories were expected to fall by about 1.8-million barrels in the week to June 30, which would mark a third straight week of declines, four analysts polled by Reuters forecast.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Oil stumbles amid economic slowdown fears
Despite supply cuts, global economic slowdown fears and potential rate hikes trigger an oil price slump
Tokyo — Oil prices eased on Wednesday, paring the previous day’s gain as fears over a global economic slowdown denting fuel demand outweighed expectations of tighter supply due to output cuts announced by top exporters Saudi Arabia and Russia for August.
Brent crude was down 14c, or 0.2%, at $76.11 a barrel by 12.27am GMT, after climbing $1.60 on Tuesday.
US West Texas Intermediate (WTI) crude futures were at $71.14 a barrel, up $1.35, or 1.9%, from Monday’s close, having traded through a US holiday to mark Independence Day without a settlement.
“Oil prices came under pressure again due to lingering worries over a slowdown in the global economy and further hikes of interest rates in the US and Europe,” said Tomomichi Akuta, senior economist at Mitsubishi UFJ Research and Consulting.
“The market will likely continue to move back and forth for some time, focusing on economic indicators in China and monetary policy by central banks,” he said, predicting Brent would trade about $75 a barrel.
Saudi Arabia, the world’s biggest crude exporter, on Monday said it would extend its voluntary output cut of 1-million barrels per day (bpd) to August, while Russia and Algeria volunteered to lower their August output and export levels by 500,000 bpd and 20,000 bpd, respectively.
The move only briefly lifted the market. The latest decision by Saudi Arabia and Russia could be viewed as a bearish signal for prices, as it confirms that optimistic views on demand growth are faltering.
Opec+, a group comprising the Organization of the Petroleum Exporting Countries and allies including Russia that pumps around 40% of the world’s crude, has been cutting oil output since November in the face of flagging prices.
Investors remained concerned about oil demand, however, after business surveys showed a slump in global factory activity because of sluggish demand in China and in Europe.
Traders will be looking for demand cues from industry data on US crude and product inventories from the American Petroleum Institute (API) later on Wednesday and government data on Thursday, both delayed by a day due to the US holiday.
US crude inventories were expected to fall by about 1.8-million barrels in the week to June 30, which would mark a third straight week of declines, four analysts polled by Reuters forecast.
Reuters
Oil price rises as Saudis and Russians pledge to slow flow of crude
Oil prices stay steady ahead of supply cuts
Oil rises as markets weigh supply cuts against gloomy macroeconomic outlook
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