Oil futures have struggled to maintain gains made early Monday, after Saudi Arabia announced that it would extend its 1 million barrels-per-day production reduction through August. Russia also said it would reduce exports by 500,000 barrels per day this month.
Price Action
- West Texas Intermediate crude oil for August delivery CL00, +0.58% CL.1, +0.58% CLQ23, +0.58% climbed 35 cents or 0.6% to $70.99 a barrel at the New York Mercantile Exchange.
- On ICE Futures Europe, September Brent crude BRNU23 was up 0.5% at $75.82 a barrel.
- On Nymex, August gas RBQ23 -0.82% fell 0.4% to $2.534 per gallon. August heating oil HOQ23 -0.89% dropped 0.6% to $2.433.
- Natural gas , NGQ23 -3.36% fell 0.7% to $2.431 per Million British Thermal Units in August.
The U.S. market will be closed on Tuesday, July 4, for Independence Day.
Market drivers
Crude futures rose after Saudi Arabia’s energy ministry announced that the voluntary cutback of 1 million barrels per day, which took effect in this month, would be extended until August. This will keep the nation’s production at 9 million barrels per day.
According to reports, Alexander Novak, the Russian deputy prime minister, said that his country would reduce its exports to 500,000 barrels per day in July “in order to maintain an equilibrium on the oil markets.”
Analysts at Sevens Report Research wrote that oil prices rose modestly following the announcements. However, it was not enough to cause a “material rally”.
Saudi Arabia announced on June 4, a voluntary July production cut of 1,000,000 barrels per day as the Organization of Petroleum Exporting Countries (OPEC) and its allies decided to maintain earlier production limits. Saudi Energy Minister Abdulaziz bin Salman said that the cut may be extended.
Analysts expected a continuation of the reduction, given crude’s continued weakening.
“My first impression is that the markets don’t take them seriously. Oil prices are rising by less than 1%, which is in line with recent trends. The price is still in the multimonth range, so there’s no reason to panic, said Craig Erlam of Oanda.
He said it would have been more surprising if Saudi Arabia had not extended the reduction past the end July. This means that the announcement has already been priced in.
Also, there was skepticism about Russia.
In a recent note, Fawad Rasaqzada said that the key question is whether oil prices can continue to rise despite their recent tendency to fall.
He wrote: “Traders have always sold in to the price jumps that have been triggered by the supply cuts of the group because they are skeptical about the effectiveness of the cuts, especially since Russia consistently produces and sells more oil than it agreed.” “Will this time be different?”
Razaqzada explained that the lack of market reaction indicates traders are waiting for proof Russia has complied.
The oil futures market ended Friday with a monthly gain, but WTI suffered a second consecutive quarter decline — off almost 7% — while Brent posted its fourth straight quarterly loss.
Do you think the stock market rally in 2023 is impressive? Zoom out!
Analysts and traders remain skeptical that Russia will meet its earlier pledge to reduce production by 500,000 barrels per day until the end of the year.
![Energy Central Top Voices 2024 [All Network Summary]](https://energynews.today/wp-content/uploads/2024/12/picture-274514-1696273521-90x60.webp)
