Oil prices slip after Saudi-driven rally

NEW YORK CITY: Oil prices slid on Tuesday as dealers mulled the weak demand outlook after having rallied the previous day on output cuts from key crude producer Saudi Arabia.

Europe’s Brent oil contract and US counterpart WTI crude fell more than 2 percent before trimming losses, one day after bouncing on news that Riyadh slashed daily output by 1 million barrels for July in a bid to prop up prices.

The announcement came at a weekend meeting of the 23-nation OPEC+ oil producers’ alliance, which also agreed to continue its current production cuts until the end of next year.
SLIDE The logo of the Organization of the Petroleoum Exporting Countries (OPEC) is seen outside of OPEC’s headquarters in Vienna, Austria, on March 3, 2022. Oil prices slid on Tuesday, June 6, 2023 as dealers consider the weak demand after rallying the previous day from price cuts by Saudi Arabia. AP PHOTO

“Oil prices are under pressure… as the glow from Saudi’s supply cut fades, and the reality of the sluggish demand backdrop sets in,” noted Victoria Scholar, head of investment at trading firm Interactive Investor.

Saxo Bank analyst Ole Hansen said the Saudi decision was initially seen as positive for oil prices as less production would tighten supplies.

But “the market chose to see it differently, basically concluding that OPEC doubts its own projections” of demand increasing by 2 million barrels per day in 2023, Hansen added.

Asian stocks mostly fell as investors also digested a surprise interest rate increase from the Reserve Bank of Australia (RBA).

The move sparked talk that global central banks were not yet done hiking rates to combat stubbornly high inflation, weighing on sentiment.

The RBA lifted its main rate by 25 basis points to 4.1 percent, the highest level since May 2012. In reaction, the Australian dollar jumped more than 1 percent against the greenback, which traded mixed against the euro and yen.

But after starting in the red, equities in Europe and on Wall Street pushed higher.

US stocks rose Tuesday at the end of a choppy session as beaten-down regional banking shares advanced on a quiet day for markets. Investor sentiment has broadly improved with US lawmakers agreeing on a compromise fiscal package to avert a debt default and financial shares stabilizing following the failure of several regional banks earlier in the year.

The broad-based S&P 500 gained 0.2 percent while the tech-rich Nasdaq was up 0.4 percent.

Investors ‘catch their breath’

The tepid rebound came after a global advance stumbled Monday, with a below-par reading on US services sector activity hinting at weakness in a key area of the economy.

“After a brief rally since the end of last week, markets have taken a moment to catch their breath,” said AJ Bell investment director Russ Mould.

Traders have been broadly upbeat after a “Goldilocks” jobs report Friday that was neither too good nor too bad, possibly giving the Federal Reserve room to hold monetary policy next week.

There is growing hope that the US central bank will skip a further rate hike but flag a resumption in July, as officials try to bring inflation down while limiting damage to the economy and the troubled banking sector.

Shares in Coinbase tanked more than 19 percent before trimming losses after US securities regulators sued the cryptocurrency platform, alleging that its failure to register as a securities exchange venue exposed investors to risk.

On Monday, US regulators charged cryptocurrency giant Binance over securities law violations.

Bitcoin slumped more than 4 percent to around $25,500.

Shares in Apple slid 0.2 percent a day after the company unveiled the Vision Pro, its first mixed reality headset, with a price tag of $3,499.