Oil prices fall in early trade

5 Jul 2023 , 12:17 PM

Wednesday saw a decline in oil prices, wiping out the day’s gains as concerns over a slowing global economy weighing on fuel demand trumped anticipations of a tighter market due to output reductions announced by major exporters Saudi Arabia and Russia for August.

After rising $1.60 on Tuesday, Brent crude was down 14 cents, or 0.2%, at $76.11 a barrel by 0027 GMT.

After trading through an American holiday to celebrate Independence Day without a settlement, West Texas Intermediate (WTI) oil futures were at $71.14 a barrel, up $1.35 or 1.9% from Monday’s finish.

The largest crude exporter in the world, Saudi Arabia, announced on Monday that it would continue to reduce its voluntary output by 1 million barrels per day (bpd) through August. In addition, Russia and Algeria offered to reduce their respective August output and export levels by 500,000 and 20,000 bpd.

The market was only briefly buoyed by the action. The new decision by Saudi Arabia and Russia may be seen as a warning sign for lower prices because it reveals that the once-optimistic notion of demand growth is now in doubt.

In response to falling oil prices, OPEC+, a group made up of the Organisation of the Petroleum Exporting Countries and allies like Russia that produces about 40% of the world’s petroleum, has been reducing oil output since November.

Investors remained concerned about oil demand, however, after business surveys showed a slump in global factory activity because of sluggish demand in China and in Europe.

Traders will be looking for demand cues from industry data on U.S. crude and product inventories from the American Petroleum Institute later on Wednesday and government data on Thursday, both delayed by a day due to the U.S. holiday.

U.S. crude inventories were expected to fall by about 1.8 million barrels in the week to June 30, which would mark a third straight week of declines, four analysts polled by Reuters forecast.

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