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RIYADH: Oil rose on Monday after top exporters Saudi Arabia and Russia announced supply cuts for August, overshadowing concern over a global economic slowdown and the potential for further increases to US interest rates.
Brent crude futures were up 0.9 percent, or 68 cents at $76.09 a barrel by 01:21 p.m. Saudi time after gaining 0.8 percent on Friday. US West Texas Intermediate crude rose nearly 1 percent, or 69 cents to $71.33, having gained 1.1 percent in the previous session.
Brent fell for the fourth straight quarter by the end of June while WTI notched a second quarterly drop as the world’s top two economies, the US and China, lost speed in the second quarter.
Fears of a further slowdown hurting fuel demand grew after data on Friday showed US inflation still outpacing the central bank’s 2 percent target and stoked expectations it would hike interest rates again.
Higher interest rates could strengthen the greenback, making commodities more expensive for holders of other currencies, and also dampen oil demand.
Saudi Arabia to extend voluntary cut of 1 million bpd to August
In a bid to stabilize the oil market, Saudi Arabia will extend its voluntary oil output cut of 1 million barrels per day to August, according to a Saudi Press Agency report.
Quoting an official source from the Ministry of Energy, SPA reported that the Kingdom’s production for the month of August will be approximately 9 million bpd.
The SPA report added this cut is in addition to the voluntary cut previously announced by the Kingdom in April 2023, which extends until the end of December 2024.
Saudi Arabia had pledged to make a deep cut to its output in July, on top of a broader OPEC+ deal to limit supply into 2024 as the group sought to boost flagging oil prices.
Russia, seeking to nudge up global oil prices in concert with Saudi Arabia, also announced that will reduce its oil exports by 500,000 bpd in August.
India’s oil imports from Russia climb to a new peak in June
India imported a record volume of Russian crude oil in June, as Asia’s second-largest economy is reaching the limit of its buying splurge from the major OPEC+ producer.
According to Viktor Katona, the head of crude analysis at Kpler, India’s import of Russian crude hit 2.2 million bpdin June, exceeding the combined shipments of Saudi Arabia and Iraq for the same month.
It was after the Ukrainian invasion that India started importing large amount of Russian crude as European countries shied away from buying energy imports from Moscow.
According to the analytics firm, India’s energy imports from Russia are expected to be reduced next month, as the country needs to maintain good relations with other suppliers.
Asia refiners expect Saudi Arabia to cut August crude prices
Asian refiners expect Saudi Arabia to lower prices for its crude supply to the region in August, even as the top oil exporter pledged to deepen production cuts in July as part of a broader OPEC+ deal, according to a Reuters survey.
Saudi Arabia in June unexpectedly raised prices for July-loading cargoes, eating into Asian refiners’ margins.
To support global prices depressed by rising interest rates and recessionary fears, the producer volunteered to cut output by 1 million bpd in July on top of an OPEC+ deal to limit supply into 2024.
State oil company Saudi Aramco is expected to cut the official selling price for Arab Light crude in August by about 50 cents a barrel from the prior month, Reuters said based on the survey which included six refining sources.
The July OSP for the flagship grade hit a six-month high of $3 a barrel above the average of Dubai and Oman quotes.
Saudi crude OSPs are usually released around the fifth of each month and set the trend for Iranian, Kuwaiti and Iraqi prices.
(With input from Reuters)