Oil rose as traders weighed production cuts from Saudi Arabia and Russia after a series of low-volume trading sessions.
The two OPEC+ cores announced their latest batch of curbs on Monday, with an extension to a supply cut by Riyadh and a new pledge to cut Moscow’s output. Brent settled above $76 a barrel while WTI recovered, catching up with the global benchmark after a US holiday on Tuesday.
Brent’s fast spread (the gap between the two nearest contracts) is again a bullish and lagging structure. The move is in line with traders’ reassessment of their expectations for near-term inventory sourcing on the horizon, said Daniel Ghali, commodities strategist at TD Securities.
“Speculative short hedging has probably provided some price support, but fundamentally our supply risk indicator is printing its highest levels to date,” Ghali said. “Saudi Arabia’s decision to renew its voluntary production cuts and Russia’s decision to cut exports, rather than production, are the key factors contributing to the recent gains.”
The United Arab Emirates will not join voluntary oil cuts at this time, the country’s energy minister said. Saudi Energy Minister Prince Abdulaziz bin Salman said Russia’s latest oil cut is significant as it will affect exports.
Crude has plunged this year amid China’s stuttering economic recovery and after central banks in the US and Europe raised rates to quell inflation, putting energy demand at risk.
There have also been pockets of fundamental strength in recent days. Kazakhstan’s CPC crude has faced disruptions as a result of power outages in the country. Separately, a refinery in Germany is limiting diesel supplies, a sign of regional supply tightness.
Prices:
- WTI for August delivery rose $2.00 to settle at $71.79 a barrel in New York.
- Futures were not settled on Tuesday due to the U.S. holiday.
- September Brent rose 40 cents to settle at $76.65 a barrel.
