Oil Prices Rebound After Saudis, Russia, Pledge To Limit Supply

Meanwhile, economic performance in two countries is deemed worse than expected: File Image/Pixabay

Oil traders flip-flopped yet again on Thursday by erasing the losses of the previous session and boosting the commodity by over 2 percent, on expectations that Saudi Arabia and Russia will keep supply tight at least through September.

Brent settled up $1.94, or 2.3 percent, to $85.14 per barrel, and West Texas Intermediate settled up $2.06, or 2.6 percent, to $81.55 after the Saudis stated it will extend a voluntary oil output cut of one million barrels per day (bpd) for a third month to include September, resulting in about 9 million bpd of production for that month.

Citing an official source from the Ministry of Energy, the  Saudi Press Agency reported that "Saudi Arabia will extend the voluntary cut of one million barrels per day, which has gone into implementation in July, for another month to include the month of September that can be extended or extended and deepened.

"The source confirmed that this additional voluntary cut comes to reinforce the precautionary efforts made by OPEC Plus countries with the aim of supporting the stability and balance of oil markets."

This was accompanied by Alexander Novak, deputy prime minister of Russia, stating that his country will cut exports in September.

Novak said , "Within the efforts to ensure the oil market remains balanced Russia will continue to voluntarily reduce its oil supply in the month of September, now by 300,000 bpd, by cutting its exports by that quantity to global markets."

Oil on Thursday was also supported by expectations that the Organization of the Petroleum Exporting Countries (OPEC) will agree to limit supply into next year when its ministers meet on Friday to discuss market matters.

Oil trading of late has bounced between severely alternating sentiments, with traders ignoring troubling news in one session and bullish news the next: on Thursday they chose to ignore the disclosure that the U.S. services sector slowed in July as businesses faced higher prices for inputs, suggesting that a return to low inflation could be prolonged.

Also overlooked was the Bank of England raising its key interest rate by a quarter of a percentage point to a 15-year high of 5.25 percent, its 14th back-to-back increase; and euro zone business activity in July deemed by economists to be worse than initially thought.

Headline inflation in the UK was still at nearly 8 percent in June, nearly four times the level that banks define as price stability.

Of Thursday's trading activity Giovanni Staunovo, a commodities analyst at UBS Group, remarked that a "stronger U.S. dollar and weaker risk sentiment remain headwinds for oil, despite a strong production guidance from Saudi Arabia being willing to extend further and deepen the cuts if market conditions warrant it."