Crude oil prices moved modestly higher in Asia pre-noon trade today following the news that Saudi Arabia would extend its voluntary oil production cuts through August.
The Kingdom would produce some 9 million bpd of oil in August—the same level it aims for this month—and could further extend the reduction beyond August, the Saudi Press Agency reported earlier this week.
On the same day, Russia announced it would cut its oil exports by half a million barrels daily next month.
“As part of the efforts to ensure a balanced market, Russia will voluntarily reduce its oil supply in August by 500,000 barrels per day by cutting its exports to global markets by that quantity,” Deputy Prime Minister Alexander Novak said in a brief statement.
The Saudi announcement was not unexpected, which is part of the reason it did not result in any sharp changes in oil prices. The Russian update may have surprised but not enough to start any significant price rallies.
Trader sentiment appears to be strongly bearish as traders focus on economic updates from major consuming countries such as China, the United States, and the European Union. These updates seem to point to weak oil demand, prompting in turn scepticism about oil prices.
“Fundamentals are not having as much influence on price direction as one would expect. Instead, the uncertain macro outlook is what the market is focused on,” Warren Patterson, the head of commodities strategy at Dutch ING, said in a note.
Noting that the Saudi cut extension was largely expected and that, if the Saudis had failed to extend it this could have pushed prices lower, Patterson also said “This leaves the Saudis in a difficult spot for the next few months, as they will have to be careful how they wind down this supply cut in the current environment.”
By Irina Slav for Oilprice.com
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