Futures Movers: Oil prices pull back from 2023 highs after downbeat China data

Crude prices more than recovered from an early August swoon as the market focus turned back to tightening supplies, enhanced by expectations Saudi Arabia will extend a production cut of 1 million barrels a day through October. Oil prices saw some pressure on Tuesday though after downbeat news from the world’s second-largest economy.

A Caixin survey showed China’s services sector expanded in August at its slowest pace in eight months, providing further evidence that the country’s post-pandemic recovery was faltering.

Also souring the tone, a eurozone survey showed output in the bloc contracted at its fastest pace in nearly three years last month.

Analysts said the backdrop for crude remains constructive though. Futures for Brent and WTI have moved into backwardation, meaning that front-dated contracts are priced higher than deferred contracts, underlining tightness in the physical market for crude.

Meanwhile, the oil market “is waiting and expecting Saudi Arabia to extend its additional voluntary supply cut, while Russia is also expected to extend its cuts,” said Warren Patterson and Ewa Manthey, commodities strategists at ING, in a note. “Given market expectations, it is unlikely that the two producers would stray away from an extension and so risk a selloff in the market.”