WTI Crude edges up as market weighs tighter supply versus recession fears

Key points

Futures on US West Texas Intermediate Crude Oil gained slightly on Thursday, as market players weighed tighter supply against concerns over global economic downturn.

Saudi Arabia, OPEC+ largest producer, said earlier this week 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 over 5.3 million barrels per day compared to levels in August 2022.

Supply tightening efforts, coupled with a larger-than-anticipated decrease in US crude inventories, have underpinned oil prices.

The latest data by the American Petroleum Institute showed crude oil inventories had dropped by 4.382 million barrels during the week ending June 30th, which has been the third successive draw and also the largest one since mid-May.

The official government inventory data will be released later on Thursday.

“The oil balance will likely tighten and so will financial conditions, judging by the Fed minutes released last night,” PVM analyst Tamas Varga was quoted as saying by Reuters.

“Persistent recession worries will probably encumber, but not prevent, oil from marching higher.”

Meanwhile, global recession concerns have increased after the latest business surveys revealed manufacturing and services activity in China and Europe had decreased.

As of 12:02 GMT on Thursday WTI Crude Oil Futures for August delivery were edging up 0.25% to trade at $71.97 per barrel.

At the same time, Brent Oil Futures for September delivery were edging up 0.13% on the day to trade at $76.75 per barrel.