Brent dips as economic headwinds outweigh supply cuts
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[July 05, 2023] By
Natalie Grover
LONDON (Reuters) -Oil benchmark Brent edged lower on Wednesday as
concern over a global economic slowdown overshadowed supply cuts
announced this week by top crude exporters Saudi Arabia and Russia.
Brent crude was down 16 cents, or 0.2%, at $76.09 a barrel by 1045 GMT
after falling more than $1 earlier in the session. The benchmark closed
with a $1.60 gain on Tuesday.
U.S. West Texas Intermediate crude traded at $71.22, up $1.43, or 2.05%,
from Monday's close.
Given there was no settlement on Tuesday because of the Independence Day
holiday, trade on Wednesday appeared to narrow the spread between the
benchmarks, with WTI catching up with Brent's gains the previous day.
"These measures are designed to push oil prices higher, but currently
they are being pulled down by macroeconomic anxiety," PVM analyst Tamas
Varga said of the price impact from the supply cuts.
"Some would argue that the latest decision to supply less oil to the
market is actually bearish because it can be viewed as an admission that
demand is struggling to grow at a healthy clip due to global economic
headwinds."
Recent surveys have shown a slump in global factory activity, reflecting
sluggish demand in China and Europe.
China's services activity in June expanded at the slowest pace in five
months while euro zone business activity slipped into contractionary
territory last month in a broad-based downturn across the bloc's
dominant services sector.
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A worker pumps petrol for a customer at
a petrol station in Barcelona, Spain, February 4, 2022.
REUTERS/Nacho Doce/File Photo
Market attention is also focused on interest rates, with U.S. and
European central banks expected to increase rates further to address
stubbornly high inflation.
Saudi Arabia, the world's biggest crude exporter, on Monday said it
would extend its voluntary output cut of 1 million barrels per day
(bpd) to August. Russia and Algeria, meanwhile, are lowering their
August output and export levels by 500,000 bpd and 20,000 bpd
respectively.
Russia-Saudi oil cooperation is still going strong as part of the
OPEC+ alliance, which will do "whatever necessary" to support the
market, Saudi energy minister Prince Abdulaziz bin Salman said on
Wednesday.
Morgan Stanley on Wednesday lowered its oil price forecasts,
predicting a market surplus in the first half of 2024 with non-OPEC
supply growing faster than demand next year.
Seperately, Kazakhstan oil output on July 4 plunged by about a fifth
from July 2 levels after widespread power outages. Kazakh crude
accounts for about 1.7% of global oil production.
(Reporting by Natalie Grover in LondonAdditional reporting by Yuka
Obayashi in Tokyo and Muyu Xu in SingaporeEditing by David Goodman)
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