Oil prices witnessed an uptick on Tuesday as the decision made by several leading producers to curtail supply bolstered market sentiment, overshadowing worries about a slowdown in manufacturing activity.
As of 04:50 ET (08:50 GMT), U.S. crude futures experienced a 1% increase, reaching $70.47 per barrel, while the Brent contract rose by 0.9% to $75.31 per barrel.
Prominent Exporters Reduce Output
On Monday, Saudi Arabia announced an extension of its voluntary production cut of one million barrels per day until August. Additionally, Russia agreed to reduce its oil exports by 500,000 barrels per day for August, and Algeria contributed a modest reduction of 20,000 barrels per day.
Although this news had a limited impact on Monday, it has effectively established a floor for oil prices, bolstering sentiment despite indications of weakening manufacturing activity in China, the United States, and much of Europe.
According to analysts at ING, “The Saudi cut was widely anticipated, and failing to extend the reduction would have further pressured the market. However, the Saudi Arabian government now faces a challenge in winding down this supply cut amid the current circumstances over the next few months.” They added, “While the Russian announcement came as a surprise, there may be skepticism within the market regarding whether Russia will truly implement the cuts. Their track record this year has been questionable.”
Trading Range Limited by U.S. Holiday
With the U.S. celebrating Independence Day, trading activity on Tuesday is expected to be constrained as market participants await additional data on the state of the world’s largest consumer economy.
Traders will be closely monitoring the minutes of the Federal Reserve’s June meeting, scheduled for release on Wednesday, to glean insights after the central bank maintained interest rates last month but signaled the possibility of at least two more rate hikes this year.
Moreover, nonfarm payrolls data for June, set to be published on Friday, is also anticipated to influence the Fed’s interest rate decisions.
Attention on Non-Policy OPEC Meeting
The Saudi and Russian production cuts precede a conference hosted by the Organization of the Petroleum Exporting Countries (OPEC) and its allies this week.
During this gathering, top executives from major global oil companies will meet with energy ministers from OPEC member states on Wednesday and Thursday, potentially providing further indications for the oil market.
However, as this is a non-policy meeting, it is unlikely that any announcement regarding future supply levels will be made.
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