July 10, 2023

Oil prices dipped on Monday after weak economic data from top consumers the United States and China, although expected crude supply cuts from Saudi Arabia and Russia limited losses.

Brent crude futures fell 40 cents, or 0.5%, to $78.07 a barrel by 1005 GMT, and U.S. West Texas Intermediate crude was also off 40 cents, or 0.5%, at $73.46 a barrel,

“Oil traders may be cautious ahead of the U.S. CPI and China’s slew of economic data later this week,” CMC Markets analyst Tina Teng said, of inflation data due out on Wednesday.

In the U.S., data on Friday pointed to the smallest job gains in two-and-a-half years, but strong wage growth.

The figures will likely keep the U.S. Federal Reserve on track to raise interest rates at its July meeting.

China’s factory-gate prices fell at the fastest pace in more than seven years in June, government data showed on Monday, as recovery in the world’s second-largest economy slowed.

However, crude prices could rebound after OPEC+ announced plans to further reduce supply, Teng added.

Oil benchmarks gained more than 4% last week to touch their highest marks since May, rising for a second straight week after the world’s biggest oil exporters Saudi Arabia and Russia pledged to deepen supply cuts in August.

“The presence of economic slowdowns in China adds to the prevailing uncertainty in the oil market,” said Mukesh Sahdev, head of downstream and oil trading at Rystad Energy.

“The market’s instability is further fueled by the ongoing tug-of-war between fears of demand control by Western economies and the supply-control strategies employed by OPEC, which impacts the oil market’s delicate balance.”

Saudi Arabia will extend its 1 million barrels per day (bpd) output cut into August and Russia will cut crude exports by 500,000 bpd. Instead of cutting output, Russia will be using the crude to produce more fuel to meet domestic demand, a government source told Reuters on Friday.

Saudi Arabia’s cuts are easing its oil glut as floating storage off the Egyptian Red Sea port of Ain Sukhna is down by almost half to 10.5 million barrels from mid-June, according to data from oil analytics firm Vortexa as of July 7.

REUTERS