(Bloomberg) -- Oil rose modestly as traders assessed the latest salvo from OPEC+ kingpins Saudi Arabia and Russia to prop up prices by curbing supply.
West Texas Intermediate edged above $70 a barrel, clawing back some of the 1.2% loss in the previous session even as the cuts were announced. Saudi Arabia said that it will prolong a unilateral 1 million barrel a day supply cut by one month into August, a move traders had expected. Separately, Russia announced a fresh reduction, while Algeria plans to make more modest curbs.
Oil has lost 13% this year despite concerted efforts by the Organization of Petroleum Exporting Countries and its allies to buttress prices — and take the fight to short sellers betting on losses — by curtailing output. The drop has been driven by a souring macroeconomic outlook in the US, China and Europe, as well as still-healthy supplies from Russia and other nations including Iran.
“Liquidity will be low with US markets closed,” ANZ Group Holdings Ltd. said in a daily note, referring to the July 4 Independence Day break. “However, the extension of supply cuts from Saudi Arabia should support oil prices.”
Although OPEC+ supplies have been pared back, oil markets remain in contango, a bearish pattern in which near-term prices are cheaper than those further out. WTI’s prompt spread — the difference between its two nearest contracts — was 12 cents a barrel in contango compared with 5 cents in backwardation, the opposite pattern, two months ago.
Still, there’s widespread expectation among banks that the crude market should show signs of tightening up this half, including from Standard Chartered Plc. The shift may be driven by the moves from OPEC+, a US push to start replenishing the nation’s depleted Strategic Petroleum Reserve, and higher energy consumption in major Asian importers China and India.
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