The production cut announcement did not boost oil prices. Saudi Arabia announced an additional cut of 1 million barrels per day, but the announcement was overshadowed by demand concerns.
The Organization of the Petroleum Exporting Countries and Allies (OPEC+) reached an agreement to extend production cuts until 2024 and give the United Arab Emirates a larger quota next year, according to a statement from the group. However, Saudi Arabia, the largest exporter of the commodity, will make an additional voluntary cut of 1 million barrels of oil per day as part of a deal struck by the cartel.
The oil market reacted to the news with an increase the day before, rising over 3% intraday, but later the gains eased. The Brent crude futures contract for August closed with a gain of only 0.76% at $76.71 per barrel after reaching a peak of 3.4% during the session.
Yesterday, Tuesday, the same contract fell 1.68% to $75.42, with fears of global slowdown overshadowing the production cut, corroborating analysts’ view that Saudi Arabia’s production cut could provide some support to the oil market, but in the short term, with other factors impacting prices.
On the same day, the market reacted to the news pointing out concerns of a recession following the US services PMI data.
The growth of the US services sector weakened in May, with a slowdown in new orders, leading to a measure of prices paid by companies for inputs hitting a three-year low, which could assist the Federal Reserve in its fight against inflation.
