On Tuesday, oil prices were little changed as traders weighed supply cuts by the world’s biggest oil exporters against a sluggish global economic outlook. Brent crude futures were up 2 cents to $77.71 a barrel by 0945 GMT, while U.S. West Texas Intermediate crude was up 5 cents at $73.04.
Top exporters Saudi Arabia and Russia boosted crude prices on Monday, with the latter announcing it would cut production again in August to help balance the market. The Organization of the Petroleum Exporting Countries, or OPEC, and its non-OPEC partners, known as OPEC+, pump about 40 percent of the world’s oil.
Saudi Arabia said it would reduce output by another 1 million bpd to reinforce “precautionary efforts.” Russia, co-chair of OPEC Plus and Saudi Arabia, said its new cut would come into effect in August. The announcements appeared to be coordinated to demonstrate that OPEC Plus was not operating alone, said Richard Bronze, head of geopolitics at Energy Aspects.
The underlying concern for oil remains the pace at which global inflation is rising and the potential impact that could have on interest rate policies. The Federal Reserve is widely expected to raise rates again this week, and the European Central Bank has signaled that it may also act in the coming months. Both actions should reduce commodity demand, which tends to lose value when interest rates are high.
However, hopes for higher demand in the developing world in the second half of 2023 have stalled as many consumers remain cautious amid ongoing concerns about the global economy’s health. The slowdown has eroded oil’s gains since the start of the year, and the commodity is down 10% this year.
Traders are also watching data on U.S. oil inventories, due from industry group the American Petroleum Institute later on Wednesday and government data on Thursday. Analysts expect both to show a drawdown in crude and product stocks, although the report on refinery activity is likely to be delayed by a day because of the holiday.
Moreover, traders are looking ahead to critical data on U.S. consumer inflation and factory activity this week, which will provide further guidance for the demand outlook. Investors will also be looking for news on China’s economy as it struggles to overcome the impact of a trade war with the United States. The dollar was slightly more robust against the euro but was still below its 2019 peak.