Oil weakened after rallying more than 2% Tuesday on Saudi Arabian and Russian production cuts.
(Bloomberg) — Oil weakened after rallying more than 2% Tuesday on Saudi Arabian and Russian production cuts.
Global benchmark Brent dropped back below $76 a barrel following the gain in the previous low-volume session amid a US holiday. The two OPEC+ linchpins announced their latest batch of curbs on Monday, with a supply-cut extension by Riyadh and a fresh pledge to reduce production from Moscow.
The UAE won’t be joining voluntary oil cuts at this time, the country’s energy minister said. Saudi Energy Minister Prince Abdulaziz bin Salman was due to address the 8th OPEC International Seminar in Vienna Wednesday.
Morgan Stanley cut its fourth-quarter forecast for Brent to $70 a barrel from $75 in a note published after the latest curbs were made public.
“We still model stock draws in 3Q but expect oil price softness to continue as the market’s focus shifts to 1H24 when balances look in surplus,” analysts including Martijn Rats and Charlotte Firkins wrote.
Crude has slumped this year amid China’s stuttering recovery and after central banks in the US and Europe raised rates to quell inflation, jeopardizing energy demand. Still, key metrics are now strengthening. Brent’s prompt spread — the gap between the two nearest contracts — is back in a bullish, backwardated structure, a sign of a tightening market.
Traders are also on alert this week for the release of official selling prices from Saudi Aramco, including for its flagship Arab Light grade. The Saudi pricing patterns are often matched by neighboring producers and can be pivotal in influencing physical demand from different regions.
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–With assistance from Haidi Lun, Rishaad Salamat and Sharon Cho.
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