Oil prices rise as supply cuts offset weak demand concerns

July 04, 2023 (MLN): Oil prices rose on Tuesday amid supply cuts for August imposed by Saudi Arabia and Russia outweighing mixed views on economic data that could hint at weak crude demand.

Brent crude is currently trading at $75.58 per barrel, up by 1.02% on the day.

While West Texas Intermediate crude (WTI) is trading at $70.78 per barrel, up by 0.97% on the day.

Saudi Arabia said it would extend its voluntary oil output cut of 1 million barrels per day (bpd) for another month to include August, adding that the cut could be extended beyond that month, as Reuters reported.

In addition, Russia, the world's second-largest oil exporter after Saudi Arabia, has already pledged to reduce its output by 500,000 barrels per day (bpd) to 9.5m bpd from March until year-end.

The cuts amount to 1.5% of global supply and bring the total pledged by OPEC+ oil producers to 5.16m bpd as Riyadh and Moscow look to prop up prices.

However, business surveys have shown a slump in global factory activity because of sluggish demand in China and Europe, and U.S. manufacturing also fell further in June reaching levels last seen in the initial wave of the COVID-19 pandemic.

According to some analysts, this uncertainty will likely overshadow the OPEC+ effort to tighten supply and boost prices.

Even before these new cut announcements, International Energy Agency (IEA) data suggested the oil market was set to show a supply deficit of roughly 2m bpd in the third and fourth quarters, noted Commerzbank analysts

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