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Oil prices climbed 2% on Tue as markets weighed Aug supply cuts by top exporters Saudi Arabia and Russia against a weak global economic outlook.
Saudi Arabia on Mon said it would extend its voluntary output cut of 1 m bpd to Aug while Russia and Algeria volunteered to lower their Aug output and export levels by 500,000 bpd and 20,000 bpd, respectively.
If fully implemented, that would bring a combined reduction of 5.36 m bpd from Aug 2022 - possibly even more because several countries in the OPEC+ producer group are unable to fulfil their output quotas, said PVM analyst Tamas Varga.
The total cuts now stand at more than 5 m bpd, or 5% of global oil output.
Brent crude futures settled up USD1.60 at USD76.25 on Tue.
"Clearly, the Saudis are taking proactive and pre-emptive steps to stabilize the price of crude oil as well as see gains to reach USD80 a barrel to sustain their domestic budgets," said Andrew Lipow, president of Houston-based Lipow Oil Associates.
Even so, the market will wait to verify Russia's announced cuts, and concerns continue that high interest rates will weigh on global demand, Lipow said.
Little has changed in oil dynamics despite Monday's announcements, said OANDA analyst Craig Erlam. "Only a significant break above USD77 will suggest something has changed, otherwise range-bound trade could well continue."
Business surveys have shown a slump in global factory activity because of sluggish demand in China and Europe, and U.S. manufacturing also fell further in Jun to levels last registered in the first wave of the COVID-19 pandemic.
This broader uncertainty is likely to overshadow OPEC+ efforts to tighten supply, some analysts said.
Even before the latest cut announcements, IEA data suggested the oil market was set to show a supply deficit of roughly 2 m bpd in the third and fourth quarters, Commerzbank analysts said.
Oil prices did not jump significantly on the news, largely because of demand concerns over China's sluggish economic recovery after the lifting of pandemic restrictions. Meanwhile, interest rates in the U.S. and Europe are expected to rise further to address persistently high inflation, the analysts said.
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