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Oil prices decline despite output cuts by Saudi, Russia

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Oil prices slipped in Asian trade on Thursday as fears of a sluggish demand recovery in the world’s top crude importer China offset the prospect of tighter supply, with top exporters Saudi Arabia and Russia cutting output.

Brent crude futures dipped 21 cents, or 0.3 percent, to $76.44 a barrel at 0650 GMT, after settling higher 0.5 percent the previous day.

U.S. West Texas Intermediate crude fell 4 cents to $71.75 a barrel, after closing 2.9 percent higher in post-holiday trade on Wednesday to catch up with Brent’s gains earlier in the week.

“Despite calls for supply cuts over past months, oil prices have largely remained locked within a ranging pattern as lingering caution around the demand outlook continues to put a cap on the upside,” said Yeap Jun Rong, market strategist at IG.

“Near-term, a move above the key $80.00 level may be needed to provide some conviction for the bulls,” Yeap added.

Demand concerns lingered over China’s slow economic recovery after the lifting of pandemic restrictions, on top of global macroeconomic headwinds and interest rate hikes by central banks.

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Weighing on the demand outlook, China’s services activity expanded at the slowest pace in five months in June, a private-sector survey showed on Wednesday, as weakening demand weighed on post-pandemic recovery momentum.

“The upside looks to be limited due to uncertainty over the pace of China’s economic growth and fuel demand recovery,” said Tatsufumi Okoshi, senior economist at Nomura Securities, predicting WTI would remain in a range of $65 to $75 a barrel going forward.

But Saudi Arabia’s supply curb announcement on Monday and expectations for a possible further reduction, along with a bigger-than-expected drop in U.S. crude stocks, provided some support to sentiment, Okoshi said.

U.S. crude stocks fell by about 4.4 million barrels in the week ended June 30, while gasoline and distillate inventories rose, according to market sources citing American Petroleum Institute figures. Analysts had expected a drop in crude inventories of about 1 million barrels in a Reuters poll.

Government data on U.S. inventories is due at 11:00 a.m. EDT (1500 GMT) on Thursday.

On Wednesday, Saudi energy minister Prince Abdulaziz bin Salman said that Russia-Saudi oil cooperation is still going strong as part of the OPEC+ alliance, which will do “whatever necessary” to support the market.

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