Oil prices today: Brent, MCX crude edge higher as Saudi Arabia, Russia announce August output cuts; check details

Oil prices rose on July 3 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 announced that 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, seeking to nudge up global oil prices in tandem with Saudi Arabia, will reduce its oil exports by 500,000 bpd in August, Deputy Prime Minister Alexander Novak announced on today, further tightening global supplies. The cuts amount to 1.5 per cent of global supply and bring the total pledged by the Organisation of Petroleum Exporting Countries and its allies or OPEC+ to 5.16 million bpd.

Brent crude futures were up 0.6 per cent, or 43 cents at $75.84 a barrel by 1119 GMT after gaining 0.8 per cent on June 30. US West Texas Intermediate crude rose 0.7 per cent, or 48 cents to $71.12, having gained 1.1 per cent in the previous session.

Brent has dropped from $113 per barrel a year ago, sent lower by concerns of an economic slowdown and ample supplies from major producers. Both Saudi and  Russia have been trying to raise oil prices.

Back home, on the Multi Commodity Exchange (MCX), crude oil futures due for a July 19 expiry, was last trading higher by 1.14 per cent higher at ₹5,865 per bbl, having swung between ₹5,749 and ₹5,890 per bbl during the session so far, compared to their previous close of ₹5,799 per bbl. 

Also Read: Explained | What does Saudi's oil output cut mean for India?

New output cuts, rate hike fears: Key factors driving crude oil market this week

-Oil prices rallied after Saudi Arabia extended its voluntary cuts to August."The kingdom's production for the month of August 2023 will be approximately nine million barrels per day," the SPA quoted an official source from the Ministry of Energy as saying. The cuts will take the kingdom’s production to the lowest level in several years, sacrificing sales volumes for what has so far been little reward in terms of higher prices.

-Shortly after the Saudi announcement, Russia Prime Minister Alexander Novak announced reduction in oil exports from August. "Within the efforts to ensure the oil market remains balanced, Russia will voluntarily reduce its oil supply in the month of August by 500 thousand barrels per day by cutting its exports by that quantity to global markets," Novak said in a statement.

-OPEC already has in place cuts of 3.66 million bpd, amounting to 3.6 per cent of global demand, including 2 million bpd agreed last year and voluntary cuts of 1.66 million bpd agreed in April and extended to December 2024.

-Fears of a further economic slowdown denting fuel demand had grown on Friday as US inflation continued to outpace the central bank's two per cent target and stoked expectations that it would raise interest rates again. Higher interest rates could strengthen the dollar, making commodities such as oil more expensive for buyers holding other currencies.

-The Federal Open Market Committee (FOMC) will release the minutes of the previous US Fed meeting this week which will give the outlook for further rate hikes by the central bank. Hawkish remarks buy Fed Chair Jerome Powell have strengthened bets of more hikes in the remainder of the year.