Oil rose Tuesday as markets weighed supply cuts for August by top exporters Saudi Arabia and Russia against an uncertain global economic outlook. Brent crude futures climbed 32 cents, or 0.42%, to $75.73 a barrel by 0805 GMT, while U.S. West Texas Intermediate crude was at $70.96 a barrel, up 32 cents, or 0.45%.
OPEC+ aims to prop up prices that have slumped from more than $100 a barrel since the Russian invasion of Ukraine last year and hit global inflation. The group’s 23 members are due to meet Sunday in Vienna, with Saudi Arabia and Russia battling for influence.
While OPEC+ may be able to limit supplies in the long term, demand for oil remains fragile. The gloomy economic outlook has dampened business confidence in crucial energy consumers in China and the United States. That has made it hard for some analysts to see the potential for higher oil prices despite a tightening in oil inventories, which have slid since the peak of the global crude crisis in late 2014.
On Monday, Saudi Arabia said it would extend a voluntary output cut of 1 million barrels per day (bpd) through at least August. Russia’s deputy prime minister said Moscow will reduce production by 500,000 bpd next month. Both countries have agreed to the cut to push up prices.
But a recent rise in interest rates in the United States and elsewhere has made investors wonder if consumer spending will pick up enough to soak up new oil supply. That has tempered enthusiasm for additional output cuts by OPEC+.
Markets also continue to be cautious about the possibility of further rate hikes in the U.S., which would further squeeze household finances. The risk of additional rate hikes has pushed up the dollar, which makes crude more expensive for non-U.S. buyers.
The prospect of further rate increases has also weighed on the oil rig count, which dropped by nine units this week to 336, according to data from Baker Hughes. U.S. energy firms add fewer rigs as they return cash to shareholders and invest in higher-profit projects.
Among other market developments, a deal between Iran and Western powers to curb Tehran’s nuclear ambitions is expected to be announced within weeks. But the details remain unclear, and Tehran has vowed to increase production in response.
Investors were also looking for further indications that the global economy is stabilizing, with the latest survey results from leading economies showing a weakening outlook. That could make it even harder for OPEC+ to raise oil prices. Traders will also keep an eye on geopolitics as Yevgeny Prigozhin, head of the Wagner paramilitary group, said his forces had halted their advance on Moscow after a Saturday stand-down. (Reporting by Paulina Sosa and Edith Chung; Editing by John Ruwitch and Ben O’Brien)