Oil prices witnessed a volatile session at the end of trading today, Thursday, July 6 (2023), as West Texas crude rose marginally, while Brent crude fell, with growing fears of a global economic recession that might limit demand, and an increase in US inventories.
This comes amid fears of a slowdown in demand recovery in China, the world’s largest importer of crude; This compensated for the potential for supply scarcity, with production cuts from Saudi Arabia and Russia.
Saudi Arabia announced, on Monday, July 3, the extension of the additional cut in oil production by one million barrels per day, for another month, during next August, with the possibility of extending it, then followed by the decision of Russia and Algeria to voluntarily reduce oil exports and production by 500,000 and 20,000 barrels. daily in a row during the same month, to support the stability and balance of the global market.
Oil prices today
At the end of the session, US West Texas Intermediate crude futures – August 2023 delivery – rose by about one cent, to $71.80 a barrel, after it was down at $70.22 during trading, according to figures monitored by the specialized energy platform.
While Brent crude futures – for September 2023 delivery – fell by 0.2%, to reach $ 76.52 a barrel, after it exceeded $ 77 a barrel during the session.
And oil prices ended their dealings, yesterday, Wednesday, July 5, with an increase of about 3%, with Saudi Arabia confirming that it would do what is necessary to support the market. This indicates the possibility of further production cuts.
Oil price analysis
“Despite calls for supply cuts over the past months, oil prices have largely remained range bound as continued caution around the demand outlook continues to cap the upside,” said Yip Jun Rong, Market Strategist at IG.
“In the near term, a move above the key level of $80 a barrel may be needed to provide some convincing to the bulls,” Yip added, according to Reuters.
Demand concerns persisted over China’s slow economic recovery after the lifting of epidemic restrictions, as well as global macroeconomic headwinds and interest rate hikes by central banks.
A survey of the private sector showed, on Wednesday, that services activity in China expanded at the slowest pace in 5 months in June; what weighs on demand expectations; Weak demand weighed on the momentum of the post-pandemic recovery.
demand for oil
“The upside appears to be limited by uncertainty about the pace of Chinese economic growth and demand recovery,” said Tatsufumi Okoshi, chief economist at Nomura Securities.
Okoshi expected WTI to remain in the range of $65 to $75 a barrel going forward, but emphasized that Saudi Arabia’s announcement of a supply curb on Monday and expectations of a possible additional cut, coupled with a larger-than-expected draw in US oil inventories, provided some support to sentiment.
US oil inventories fell by about 1.5 million barrels in the week ending June 30, as did gasoline and distillate inventories, compared to analysts’ expectations of a decline in crude stocks by about one million barrels in a Reuters poll.
OPEC+ cuts
Saudi Energy Minister Prince Abdulaziz bin Salman said on Wednesday that Russian-Saudi oil cooperation remains strong as part of the OPEC+ alliance, which will do “whatever is necessary” to support the market.
The ministers of energy and oil in the Organization of Petroleum Exporting Countries (OPEC) had held, yesterday, Wednesday, a meeting to attend the eighth international OPEC symposium in the Austrian capital Vienna, which is held annually.
During the meeting, market conditions were reviewed, and they agreed to continue consultations with their non-OPEC counterparts, through the mechanisms already in place. Including the meetings of the Joint Ministerial Oversight Committee, and the ministerial meeting of countries from OPEC and outside, to continue their continuous efforts to support the stability and balance of oil markets.
The ministers expressed their appreciation to the Kingdom; for extending its voluntary cut of 1 million bpd into August, and thanking Russia for its additional voluntary cut of 500,000 bpd in exports, and Algeria for its additional voluntary cut of 20,000 bpd in August .
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