Oil prices rose Tuesday as markets evaluated August production curbs by main exporters Saudi Arabia and Russia against a dismal global economic outlook.
On Monday, Saudi Arabia extended its voluntary output cut of 1 million barrels per day (bpd) to August. Russia and Algeria pledged to decrease their August output and exports by 500,000 and 20,000 bpd, respectively.
According to PVM analyst Tamas Varga, that will reduce supply by 5.36 million bpd from August 2022, potentially higher because numerous OPEC+ producers cannot meet their output limitations.
Over 5 million bpd—5% of world oil output—has been curtailed.
Brent crude prices rose 1.5% to $75.74 a barrel by 1328 GMT on Tuesday. WTI rose $1.07, or 1.5%, to $70.86.
The previous session’s oil benchmarks fell 1% due to a bleak macroeconomic outlook.
OANDA analyst Craig Erlam said Tuesday morning trade implies oil dynamics haven’t changed despite Monday’s announcements.
“Only a significant break above $77 will suggest something has changed; otherwise range-bound trade could well continue.”
Global factory activity has dropped because of weak demand in China and Europe, while U.S. production declined further in June to levels last seen during the COVID-19 pandemic.
Analysts expect this uncertainty to overshadow OPEC+ supply-tightening efforts.
Commerzbank analysts predicted a 2 million bpd supply gap in the third and fourth quarters based on International Energy Agency (IEA) statistics.
Demand fears from China’s slow economic rebound after pandemic restrictions lifted kept oil prices from rising. Analysts expect U.S. and European interest rates to climb to combat excessive inflation.
Tuesday’s July 4 holiday shuttered U.S. markets.
