Oil prices ease, but supply cuts keep Brent above $90/bbl. Fuel demand fell on Monday due to a stronger U.S. currency and economic worries in China. Still, Saudi Arabia and Russia continued supply curbs to keep Brent over $90 a barrel.
Brent oil slid 15 cents, or 0.2%, to $90.50 a barrel at 0644 GMT, while West Texas Intermediate crude sank 43 cents, or 0.5%, to $87.08 a barrel.
“Concerns about Chinese economic growth weighed on sentiment across commodities,” ANZ analysts said.
“The move was exacerbated by a stronger USD, which kept investor appetite low,” they said, alluding to the eight-week-high dollar.
After Saudi Arabia and Russia said they would prolong voluntary production cuts of 1.3 million barrels per day until the end of the year, oil prices rose for two weeks, with Brent reaching its highest level since November on Friday.
“Oil prices have largely converged with our fair value estimate, but with Saudi Arabia more aggressive than expected with its unilateral cut and continuing strength in demand, we caution against fading the recent run-up,” Barclays analyst Amarpreet Singh said.
The International Energy Agency and OPEC will deliver their monthly assessments this week. Strong demand will certainly boost oil prices.
Rystad Energy head of downstream and oil trading Mukesh Sahdev said the Saudi-led reduction would be obvious by year-end when refineries complete maintenance and boost output.
“Refinery maintenance will lower crude demand by 2-2.5 million bpd in September and October, but it will rebound in November and December, partially offsetting the price effects of the cuts,” Sahdev said, forecasting 10 million bpd refinery disruptions in October.
Baker Hughes said that U.S. producers installed an oil rig last week for the first time since June, although the overall count was still 127, or 17%, lower than last year.
In the weeks ahead, I.G. analyst Tony Sycamore expects WTI to carve out a new higher range at above $83 and below resistance at $93.50, with worries over demand in China and Europe restricting any appreciation.
