Oil edged higher as Saudi Arabia’s production cuts were offset by broader risk-on sentiment and traders waiting to see if the cuts materialize.
West Texas Intermediate settled 41 cents higher than Friday’s close, substantially recouping the nearly 5 percent gained on Saudi Arabia’s pledge to shave an extra million barrels a day off its July output. The country also raised all of its official retail prices for July deliveries. But traders are waiting to see if supply cuts and an improvement in demand materialize before making big bets.
The muted reaction “is further evidence that crude traders do not fear OPEC+ production cuts as catalysts for sustained rallies,” said Rebecca Babin, senior energy trader at CIBC Private Wealth. “The cut reduces downside risk, but does not inspire confidence that demand is close to reaching optimistic 2H projections.”
The move left the kingdom potentially sacrificing more market share to stabilize prices. In contrast, others in the group pledged to maintain existing cuts until the end of 2024, although Russia did not commit to curbing output further and the United Arab Emirates secured a higher output quota for next year.
The OPEC+ deal followed a dispute with African members over how their cuts are measured, which delayed the start of the meeting. The further cut next month could be extended, but the Saudis will keep the market “in suspense” over whether that will happen, Prince Abdulaziz said.
Prices:
- WTI for July delivery rose 41 cents to settle at $72.15 a barrel.
- Brent for August settlement gained 58 cents to settle at $76.71 a barrel.
Oil in New York fell 11% last month as demand concerns, particularly in China, dented confidence. Most market watchers expected OPEC+ to keep output unchanged, including Goldman Sachs Group Inc., whose analysts expect major producers to remain flat. The outcome was “moderately optimistic,” the bank said after the meeting in Vienna.
“Saudi Arabia would like prices to be above $80 a barrel,” Vandana Hari, founder of Vanda Insights in Singapore, told Bloomberg TV, referring to Brent. But if the health of the global economy falters, short sellers will “come back in no time,” he said.
