Oil prices increased on Monday (July 3) following the announcement by major oil exporters Saudi Arabia and Russia that they would implement supply cuts in August. This development overshadowed concerns about a global economic slowdown and the possibility of increased US interest rates.
Saudi Arabia decided to extend its voluntary reduction of one million barrels per day (bpd) for another month, including August. This decision was reported by the state news agency. In a joint effort to boost global oil prices, Russia also announced that it would decrease its oil exports by 500,000 bpd in August. Deputy Prime Minister Alexander Novak made this statement, thereby further tightening the global oil supply.
These cuts represent 1.5% of the total global supply and bring the overall commitment of OPEC+ oil producers to 5.16 million bpd. Both Saudi Arabia and Russia have been making efforts to support oil prices, which have declined from $113 per barrel a year ago due to concerns about an economic slowdown and abundant supplies from major producers.
Brent crude futures rose by 0.4% or 32 cents, reaching $75.73 per barrel at 1320 GMT. This increase followed a 0.8% gain on Friday. US West Texas Intermediate crude also experienced a rise of 0.5% or 32 cents, reaching $70.96 per barrel, after a 1.1% increase in the previous session.
According to PVM analyst Tamas Varga, investors are becoming more optimistic as the second half of the year begins. They anticipate a tighter oil market balance, and the positive performance of equities indicates that a recession will likely be avoided, albeit narrowly.
Earlier in the trading session, oil prices had fallen due to reports showing a decline in global factory activity in June, reflecting sluggish demand in China and Europe, which clouded the outlook for exporters.
Concerns about a further economic slowdown and its impact on fuel demand intensified on Friday as US inflation continued to exceed the central bank’s 2% target, raising expectations of another interest rate hike. The prospect of higher interest rates could strengthen the US dollar, making commodities like oil more expensive for buyers using other currencies.
