Oil prices remained calm early Tuesday, despite mixed analyst views on economic data that could point to weaker crude demand, as markets weighed supply woes from August cuts by major exporters Saudi Arabia and Russia.
Brent crude futures rose 43 cents, or 0.58%, to $75.08 a barrel at 0322 GMT. West Texas Intermediate (WTI) crude was up 43 cents, or 0.62%, to $70.22 a barrel.
Fundamentals are not having as much influence on price direction as expected. Instead, what the market is focusing on is the uncertain macro view.
While additional cuts create a stronger base for Brent around US$70/bbl, it is difficult to see this pattern changing significantly in the short term.
US markets will be closed on Tuesday for the country’s Independence Day holiday. Oil benchmarks were down about 1% in the previous session.
Saudi Arabia said on Monday it will extend the 1 million barrels per day voluntary production cut along August. Deputy Prime Minister Alexander Novak said Russia will also reduce its oil exports by 500,000 barrels per day in August.
Outages account for 1.5% of global supply. Riyadh and Moscow try to support prices, bringing the total committed by OPEC+ oil producers to 5.16 million barrels per day.
US crude inventories are expected to drop by about 1.8 million barrels in the week through June 30, marking the third consecutive week of decline. API industry data on stocks will be released on Wednesday and EIA official data on Thursday, both delayed by one day due to the US holiday.
On the macro front, analysts’ forecasts were mixed ahead after employment surveys showed a drop in global factory activity due to sluggish demand in China and Europe, and US manufacturing also fell further in June to levels most recently seen in the first wave of COVID.
While GDP gains have slumped in recent weeks due to second-quarter downgrades in China and the European region, neither the U.S. nor the global economies are at risk of recession amid a strong service sector, a slump, and a contraction in the U.S. goods sector.
However, weak economic growth indicates that demand for goods is still weak, which will put pressure on distillate consumption.
