Concerns over the global economy dragged oil prices in Asian trade on Tuesday afternoon, following knee-jerk gains a day earlier. Saudi Arabia announces unexpected production cut,
West Texas Intermediate futures for maturity in July were trading 2.04% lower at $70.70 a barrel. Brent futures for maturity in August were trading 1.67% lower at $75.42 a barrel.
The fall in oil prices has come at a time when investors and traders are eagerly waiting for oil prices to rise. of the Federal Reserve Interest rate decision during next week’s June policy meeting which will also indicate about its future policy path, The policy decisions of the central bank will have a huge impact on the demand outlook of the world’s largest oil consumer America.
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United States Brent Oil Fund BNO closed 0.078% higher on Monday while Vanguard Energy Index Fund ETF VDE 0.71% lost, According to Benzinga Pro,
cmc market analyst Leon Lee told Reuters that oil prices are still in a bear market. “…we can see that some advanced economies like Germany have already started to slide into recession,” Li said.
Saudi Budget: The fall in oil prices is certainly not favorable for Saudi Arabia, a leading member OPEC+, according to a International Monetary Fund The report, released in May, said the state would not balance its budget if oil was below $80 a barrel. informed of Bloomberg. The fund’s latest projections put this year’s break-even oil price for Saudi Arabia at $80.9, the report said.
So, it should come as no surprise that the Middle Eastern nation recently announced it would cut production by an additional one million barrels per day in July.
The unexpected move by Saudi Arabia comes at the cost of giving ground to two of its key allies, including Russia, which made no commitment to further reduce production, and the United Arab Emirates, which got higher production quotas for 2024.
Notably, Saudi Energy Minister Prince Abdulaziz bin Salman He said he would do “whatever is necessary to bring stability to this market.”