Oil slumped in Asian trade on Monday as investors were cautious this week ahead of new economic data from the US and China, the main consumers, although anticipated crude supply cuts from Saudi Arabia and Russia limited losses.
Brent crude futures are down 51 cents or 0.7%, at 0345 GMT to $77.96 a barrel, and West Texas Intermediate crude (WTI) was at $73.34 a barrel, down 52 cents, or 0.7%.
Oil traders may be cautious ahead of US CPI and economic data from China later this week. However, crude oil prices may recover after OPEC+ announced plans to further cut supply.
The pace of economic recovery in the world’s second-biggest economy slowed, according to government data on Monday, while China’s factory door prices fell the fastest in seven years in June. The presence of economic slowdowns in China adds to the uncertainty prevailing in the oil market.
Oil benchmarks rose more than 4% last week to their highest level since May, after the world’s biggest oil exporters Saudi Arabia and Russia pledged to deepen supply cuts in August.
The instability in the market is getting worse by the ongoing conflict between the demand concern struggles of Western economies and the supply control strategies implemented by OPEC that affect the delicate balance of the oil market.
Saudi Arabia will extend its 1 million bpd production cut until August, and Russia will cut its crude oil exports by 500,000 bpd. Meanwhile, it is rumored that Russia will use this capacity to produce more fuel to meet domestic demand, instead of reducing production.
Saudi Arabia’s cuts are having their effect, as the volume of floating storage off Egypt’s Red Sea port of Ain Sukhna is down nearly half from mid-June to 10.5 million barrels, data from oil analytics firm Vortexa showed on July 7.
According to some analysts, non-OPEC+ supply is keeping pace with global demand and OPEC+ needs to deepen another 700,000 bpd in the second half of the year and extend it until 2024, in addition to the announced cuts.
Data on Friday in the US showed that wage growth is still strong and the slight drop in the unemployment rate this week will keep the Fed moving towards raising interest rates at its next July meeting.
Money managers increased their net long-term U.S. crude oil futures and options positions for the week of July 3, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday.
U.S. oil rigs fell five drops to 540 last week, the lowest level since April 2022, Baker Hughes reported on Friday.
