London: Oil rose on Monday after top exporters Saudi Arabia and Russia announced supply cuts for August, overshadowing concern over a global economic slowdown and the potential for further increases to US interest rates.
Saudi Arabia on Monday said it would extend its voluntary cut of one million barrels per day (bpd) for another month to include August, the state news agency said.
Russia, meanwhile, will reduce its oil exports by 500,000 bpd in August, Deputy Prime Minister Alexander Novak said on Monday, further tightening global supplies.
Brent crude futures were up $1.04 at $76.45 a barrel by 0942 GMT (1.42pm UAE time) after gaining 0.8 per cent on Friday. US West Texas Intermediate crude rose 97 cents to $71.61, having gained 1.1 per cent in the previous session.
"Investors are turning upbeat as the second half of the year kicks off; they expect tighter oil balance and buoyant equities also suggest that recession will be avoided, albeit probably narrowly," said PVM analyst Tamas Varga.
The cuts will take the kingdom’s production to about 9 million barrels a day, the lowest level in several years, sacrificing sales volumes for what has so far been little reward in terms of higher prices.
Lackluster demand in China has capped crude near $75 a barrel, below the level Saudi Arabia needs to cover its budget. Against this backdrop, the extension was no surprise, with almost all traders and analysts surveyed by Bloomberg predicting this outcome.
Oil prices were widely expected to rally this year, but have instead sagged about due to fears about the strength of the economy as interest rates climb. Supply is still expected to tighten in the second half, but Wall Street forecasters including Goldman Sachs Group Inc. and Morgan Stanley have abandoned projections for the return of $100-a-barrel crude.
With inputs from Reuters and Bloomberg
