Oil prices retreat on concerns over global economic growth
Saudi Arabia increases price of Arab Light to Asian buyers in July to six-month high
Oil prices tumbled by more than $1 a barrel on Tuesday, retreating from a strong rally in the previous session as worries over global economic growth outweighed
Saudi Arabia’s pledge to deepen output cuts.
Brent crude futures were down $1.30, or 1.69 percent, at $75.41 a barrel by 1327 GMT. US West Texas Intermediate crude fell $1.39, or 1.93 percent, to $70.76.
Brent gained as much as $2.60 a barrel on Monday and WTI as much as $3.30 after Saudi Arabia, the world’s top exporter, said at the weekend that its output would drop by 1 million barrels per day to 9 million bpd in July.
But weaker demand, stronger supply from producers outside of the Organization of the Petroleum Exporting Countries, slower economic growth in China and potential recessions in the US and Europe mean the Saudi cut is unlikely to achieve a “sustainable price increase” into the high $80s and low $90s, Citi analysts said in a note on Tuesday.
Backwardation in Brent crude oil futures — where the current value is higher than in later months — steepened after the weekend announcement, with the six-month spread hitting a five-week high of $2.20 a barrel on Monday.
It fell to about $2.06 a barrel on Tuesday.
“The market remains focused on the risk to demand, with recession concerns mounted on a broad-based miss in US services PMI, giving room for a Fed pause on rates,” said Ole Hansen, head of commodity strategy at Saxo Bank. The US services sector barely grew in May as new orders slowed and market participants waited to see if the US Federal Reserve will raise or hold interest rates in June. Higher interest rates could curb energy demand.
KSA raises flagship crude price for Asia
Saudi Arabia has increased the price of its flagship crude Arab Light to Asian buyers in July to a six-month high.
The official selling price for Julyloading Arab Light to Asia was increased by 45 cents a barrel from
June to $3 a barrel over Oman/ Dubai quotes, according to a statement issued by state oil giant Saudi Aramco.
Meanwhile, Russian crude oil continued flooding into Asia at steep discounts. In May, China and India brought in an all-timehigh volume of Russian crude, according to preliminary assessments from ship trackers. Saudi Arabia also raised the July OSPs of other grades to Asia, all by 45 cents from the June levels. For the second straight month, the price for Arab Extra Light is set lower than Arab Light, according to the price document, Reuters reported. For other regions, the top oil exporter increased its July Arab Light OSP to northwest Europe by 90 cents to $3 a barrel above ICE Brent.