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Oil prices were steady on Tuesday as weak economic data from China offset expectations of supply cuts.
Brent, the benchmark for two thirds of the world’s oil, was trading 0.09 per cent lower at $88.92 a barrel at 9.02am UAE time, while West Texas Intermediate, the gauge that tracks US crude, edged 0.43 per cent higher to $85.92 a barrel.
On Monday, Brent settled 0.51 per cent higher at $89 a barrel. There was no trading in WTI futures overnight as markets were closed for the US Labour Day holiday.
“That there is still plenty of momentum so close to $90 a barrel may suggest we could see a strong push to break above, which would represent a big shift in the market dynamic in quite a short period of time,” said Craig Erlam, senior market analyst at Oanda.
“Saudi Arabia and Russia have been managing additional voluntary cuts on a monthly basis and could withdraw them at any point but I can’t imagine they’ll be in any rush and risk sending the price tumbling again.”
China’s services activity grew at the slowest pace in eight months in August amid weak demand, a private sector report said on Tuesday.
The Caixin/S&P Global services purchasing managers’ index (PMI) slipped to 51.8 last month from 54.1 in July, indicating a softer expansion in the country’s service sector output.
The 50-point mark divides expansion from contraction in activity.
“The slowdown in business activity coincided with a weaker increase in overall new business. New orders increased modestly, and at a pace that was below the average seen for 2023 to date,” the report said.
“Data suggested that this was partly due to weaker foreign demand for Chinese services.”
Oil prices surged to multi-month highs last week amid tightening crude supplies.
Saudi Arabia, the world’s largest oil exporter, is expected to extend its voluntary output cut of 1 million barrels a day into October.
Russia does not rule out extending its voluntary cut on crude exports until October, Deputy Prime Minister Alexander Novak was quoted as saying last week by state news agency Tass.
Russia, which has pledged to reduce its production by 500,000 bpd until the end of 2024, is expected to lower its exports by 300,000 bpd this month.
Goldman Sachs said it no longer expects Saudi Arabia to partially unwind its voluntary output cut in October, in part due to the kingdom’s willingness to “lean in longer into the rally”.
“We still see a potentially more aggressive OPEC+ price target as the key moderately bullish risk to our 12-month ahead Brent forecast of $93 a barrel,” it said.
At its August meeting, the alliance of 23 oil-producing countries agreed to keep to its current output policy.
OPEC+ has total production cuts in place of 3.66 million bpd, which includes a two million bpd reduction agreed on last year as well as voluntary cuts of 1.66 million bpd announced in April.
