Oil prices slumped on Monday, but remained near their highest levels since mid-April after major producers Saudi Arabia and Russia pledged to keep supply low for another month to further tighten global markets and support prices.
Saudi Arabia extended its production cut of 1 million barrels per day until September. Russia will cut exports by 300,000 barrels per day in September.
Brent crude futures slipped 15 cents, or 0.2%, at 0640 GMT to $86.09 a barrel, while West Texas Intermediate crude (WTI) was at $82.67 a barrel, down 15 cents, or 0.2%.
Both contracts posted their sixth consecutive weekly gains last week, marking the longest winning streak from December 2021 to January 2022.
The rise is in line with expectations that the second half for oil will be stronger than the first half. However, further upside prices are likely to consolidate at $85 per barrel (Brent) for a while, curbed by continued concerns over the pace of China’s recovery and doubts about how long Saudi and Russia will continue to cut output.
In recent weeks, oil prices have been bolstered by expectations that US interest rate hikes will slow, slumps in OPEC+ supplies and stimulus hopes to accelerate the recovery in oil demand in China, the world’s largest crude importer, after a dismal second quarter.
The world’s largest exporter, Saudi Arabia, on Thursday, extended its voluntary production cut of 1 million bpd until the end of September, adding that it could be further extended or deepened. The kingdom’s September production will be around 9 million barrels per day.
Russia said on Thursday it would cut its oil exports by 300,000 barrels per day in September. Also, a Russian warship was severely damaged in a drone attack on Russia’s Black Sea naval base in Novorossiysk last week. The port, which provides 2% of the world’s oil supply, is back in operation.
In line with production cuts, Saudi Aramco raised on Saturday the official selling prices for most grades it sells to Asia for a third month in September.
OPEC+’s output cuts, China’s stimulus measures, and the improving US economic outlook will support crude oil prices, but prices are approaching near-term resistance to their April highs.
Investors will watch Chinese economic data this week to gauge whether Beijing will take further stimulus measures to support the world’s second-largest economy.
Baker Hughes said in its weekly report Friday that the number of operating oil rigs fell by four to 525 last week, dropping to the lowest level since March 2022 for the eighth week in a row.