Oil Down: Saudi Production Cuts and Russia’s Export Cuts Fail to Boost Prices

2023-07-03 21:55:00

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New York – The oil price which had opened higher on Monday following an announcement of further production cuts from Russia and Saudi Arabia, finally ended lower, reflecting some pessimism on demand.

The barrel of Brent BRENT Brent or North Sea crude is a variation of crude oil serving as a benchmark in Europe, listed on the InterContinentalExchange (ICE), a stock exchange specializing in energy trading. It has become the first international standard for setting oil prices. of the North Sea, for delivery in September, of which it was the first day of use as a reference contract, dropped 1.00% to 74.65 dollars.

Its American equivalent, the barrel of West Texas Intermediate (WTI WTI West Texas Intermediate (WTI), also known as Texas Light Sweet, is a variation of crude oil that serves as a standard in pricing crude oil and as a commodity for oil futures contracts with the Nymex (New York Mercantile Exchange). ), the stock exchange specializing in energy.) for August delivery fell 1.20% to drop below $70 to $69.79.

Saudi Arabia has announced that it will extend its voluntary production cut of one million barrels per day in August, and that its efforts might still be extended over time, according to the Ministry of Energy quoted by the agency. official press of the kingdom.

And Moscow intends for its part to reduce its exports by 500,000 barrels per day, assured Deputy Prime Minister Alexander Novak, quoted by Russian press agencies.

But analysts at Eurasia Group said the supply cuts “will do little to alter the bearish market sentiment that is pessimistic regarding crude demand for the second half of the year.”

For James Williams of WTRG Economics, the “illogical” trajectory of the crude price — which should have risen given the extension of the reduction in supply by Saudi Arabia in particular — “is a sign that the Saudis are expecting a recession”, therefore a drop in demand.

Again Capital’s John Kilduff also believes that by extending their output cuts, the Saudis are “signalling a soft demand environment to which they must respond.”

As for the Russian initiative, which in theory should also make supply tighter and drive up prices, several analysts pointed out that the market had little faith in the reduction of these exports while Moscow, in the face of sanctions, seeks to derive revenue from its oil.

“We don’t necessarily believe what Russia is saying,” James Williams told AFP. “The market is very skeptical regarding Russia’s export cuts,” Kilduff added.

Overall, “worries regarding global growth are dominating the market” and preventing black gold prices from taking off, ANZ analysts said.

On Monday, several manufacturing indicators in Germany, France (PMI indices) and the United States (ISM index) still looked gray in June, which was not to encourage the outlook for energy demand.

Finally, in the United States, on the eve of the July 4 national holiday, trade was very weak, almost half as much as usual. Markets will be closed on Tuesday.

(c) AFP

Oil down, despite Saudi production cuts

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