Oil futures fell Tuesday, more than erasing the jump that followed Saudi Arabia’s weekend announcement of a 1 million-barrel-a-day July output cut, as traders fretted over the global economic outlook.
Price action
-
West Texas Intermediate crude for July delivery
CL00,
-2.05% CLN23,
-2.05%
fell $1.81, or 2.5%, to $70.34 a barrel on the New York Mercantile Exchange. -
August Brent crude
BRN00,
-1.86% BRNQ23,
-1.86% ,
the global benchmark, was down $1.80, or 2.3%, at $74.91 a barrel on ICE Futures Europe. -
Back on Nymex, July gasoline
RBN23,
-0.10%
fell 0.7% to $2.507 a gallon, while July heating oil
HON23,
-1.32%
was down 1.7% at $2.336 a gallon. -
Juy natural gas
NGN23,
-2.76%
dropped 1.2% to $2.217 per million British thermal units.
Market drivers
Crude prices surged at the open Sunday evening after Saudi Arabia announced it would voluntarily cut production by an additional 1 million barrels a day in July, with the potential to extend the cut. The announcement came as the OPEC+ — the Organization of the Petroleum Exporting Countries and its Russia-led allies — concluded a meeting that saw the group extend existing production cuts through the end of 2024.
Those gains faded though over the course of trading Monday, leaving crude with a modest gain at the end of the session. Futures came under renewed pressure Tuesday, with analysts citing concerns about global demand.
“In theory, the production cuts would be bullish, creating a supply deficit in the physical markets, but the combination of a significant rise in non-OPEC+ production expected for next year and ongoing worries about consumer demand given the still-elevated threat of a recession in H2’23 helped offset the OPEC+ news,” said analysts at Sevens Report Research, in a note.
“Looking ahead, those latter two dynamics should help keep a lid on the oil market in the months ahead and limit any rally at 2023 resistance just over $80 a barrel,” they wrote.
