US crude oil rose around 3% on Wednesday, closing the price gap with global benchmark Brent in a post-holiday reaction to production restrictions imposed by Saudi Arabia and Russia on Monday.
According to Reuters, after increasing by $1.60 on Tuesday, Brent crude was down 64 cents, or 0.8%, at $75.61 a barrel by 0913 GMT.
West Texas Intermediate crude for the United States was trading at $70.71, up 92 cents or 1.3% from Monday’s closing. Due to the holiday on Tuesday, there was no settlement; therefore, trading on Wednesday seemed to reduce the gap between the benchmarks, with WTI outpacing Brent’s advances from the previous day.
Some claim that the most recent move to reduce oil production is really unfavourable since it can be seen as a recognition that demand is finding it difficult to increase at a healthy rate due to adverse global economic conditions.
Despite the fact that these actions are intended to raise oil prices, macroeconomic uncertainty is now weighing them down, according to PVM analyst Tamas Varga.
Recent business surveys have revealed a decline in industrial activity globally, which is a reflection of weak demand in China and Europe.
According to a private sector survey released on Wednesday, China’s services industry increased in June at its slowest rate in five months as the momentum of the post-pandemic rebound was slowed by waning demand.
The largest supplier of crude oil in the world, Saudi Arabia, said on Monday that it would prolong its voluntary output reduction of 1 million barrels per day until August. While this is going on, Russia and Algeria are decreasing their output and export levels for August by 500,000 bpd and 20,000 bpd, respectively.
Russia-Saudi oil cooperation remains robust as part of the OPEC+ alliance, which would do “whatever is necessary” to assist the market, according to Saudi energy minister Prince Abdulaziz bin Salman on Wednesday.
