Key points
- WTI Crude rises, reversing a loss in the prior session
- Saudi Arabia to extend output cut to August
- Macroeconomic outlook uncertainty weighs on market
Futures on US West Texas Intermediate Crude Oil surged on Tuesday, as market players weighed OPEC+ supply tightening measures against a global macroeconomic uncertainty.
Saudi Arabia, OPEC+ largest producer, said on Monday that it would extend its voluntary production cut of 1 million barrels per day to August.
Additionally, Russia and Algeria volunteered to reduce their output and export levels for the same month by 500,000 barrels per day and 20,000 barrels per day, respectively.
If carried out in full, these efforts would result in a combined reduction of 5.36 million barrels per day compared to levels in August 2022, according to PVM analyst Tamas Varga.
Still, WTI settled almost 1% lower on Monday due to increasing macroeconomic outlook uncertainty.
Global factory activity has decreased due to sluggish demand in China and Europe, the latest business surveys revealed.
US manufacturing activity shrank further in June, data by the Institute for Supply Management showed yesterday, with factories resorting to layoffs.
The broader uncertainty may outweigh OPEC+ members’ supply tightening efforts, some analysts expressed concern.
According to Naeem Aslam, chief investment officer at Zaye Capital Markets, regardless of Saudi Arabia’s and Russia’s best efforts, “the days may be over for oil prices to jump back above the 90 price mark, and the prices are more likely to consolidate between the 65 and 70 price ranges.”
As of 9:42 GMT on Tuesday WTI Crude Oil Futures for August delivery were gaining 1.02% to trade at $70.50 per barrel.
At the same time, Brent Oil Futures for September delivery were gaining 1.14% on the day to trade at $75.50 per barrel.
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