BENGALURU: U.S. crude oil gained 3% on Wednesday, narrowing the price gap with global benchmark Brent in a post-holiday response to supply cuts announced on Monday by top oil exporters Saudi Arabia and Russia, as market participants awaited demand data for the Fourth of July weekend.
U.S. West Texas Intermediate crude rose $2.15 from Monday’s close, or 3.1%, to $71.91 a barrel by 11:36 a.m. EDT (1536 GMT). Brent crude futures rose 45 cents, or 0.5%, to $76.66 a barrel, after gaining $1.60 a barrel on Tuesday.
There was no settlement on Tuesday because of the U.S. holiday, so trade on Wednesday had WTI catching up with Brent’s gains the previous day.
Saudi Arabia, the world’s biggest crude exporter, on Monday said it would extend its voluntary output cut of 1 million barrels per day (bpd) to August. Russia and Algeria, meanwhile, are lowering their August output and export levels by 500,000 bpd and 20,000 bpd respectively.
Russia-Saudi oil cooperation is still going strong as part of the OPEC+ alliance, which will do “whatever necessary” to support the market, Saudi energy minister Prince Abdulaziz bin Salman said on Wednesday.
Oil prices rise 2pc as market weighs supply cuts against economic outlook
“The July voluntary cuts and the extension into August should considerably tighten the oil market, but investors will stay on the sidelines until oil inventories will show substantial draws,” said UBS analyst Giovanni Staunovo.
The American Petroleum Association will report its weekly U.S. crude oil and products inventory report after 4:30 p.m. EDT (2030 GMT) on Wednesday. The U.S. Energy Information Administration will post official data on Thursday. Both reports have been delayed by a day from their usual schedule because of the holiday.
The Fourth of July marks peak U.S. travel season and this week’s inventories reports could play a big role in pushing oil prices higher or lower, traders said.
“I guess that limits the price move. It seems investors are in a “‘I believe when I see’ world”,” Staunovo said.
Morgan Stanley on Wednesday lowered its oil price forecasts, predicting a market surplus in the first half of 2024 with non-OPEC supply growing faster than demand next year.
Recent surveys have shown a slump in global factory activity, reflecting sluggish demand in China and Europe.
Market attention is also focused on interest rates, with U.S. and European central banks expected to increase rates further to tame stubbornly high inflation.