Oil erased all of the gains that followed Saudi Arabia’s surprise pledge of an extra supply cut as persistent economic uncertainty weighs on the outlook for demand.
(Bloomberg) — Oil erased all of the gains that followed Saudi Arabia’s surprise pledge of an extra supply cut as persistent economic uncertainty weighs on the outlook for demand.
West Texas Intermediate traded near $71 a barrel on Tuesday while Brent was above $75. The decline comes after Monday’s short-lived surge following the Saudi announcement over the weekend. WTI is about $1 below Friday’s close.
“For now, the main driver of crude oil prices continues to be concerns about the global growth and demand outlook, not only in China, the world’s biggest importer, but also the US and other key consuming regions,” Ole Hansen, head of commodity strategy at Saxo Bank A/S, wrote in a note.
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WTI oil prices have also fallen further down the futures curve, with prices for December 2023 and 2024 contracts both lower than Friday’s close.
Saudi Arabia followed its move to cut output in July with an increase to its crude prices for the same month. That’s pushing some Asian refiners to consider buying more crude from other suppliers, including Russia.
“Saudi Arabia’s decision does not change our view of the oil price outlook,” analysts at Commerzbank AG wrote in a note. “We continue to envisage an only moderate price rise of Brent to $90 per barrel by the end of the year, mainly thanks to recovering demand in the Asian region.”
In Europe German factory orders unexpectedly fell in April and hundreds of flights have been canceled because of strikes in France, which are also impacting fuel deliveries. Meanwhile, Shell Plc is halting a unit at its massive Pernis oil refinery.
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