LONDON: Oil fell on Wednesday, as Saudi Arabia’s announcement to continue crude output cuts to the end of 2023 was offset by demand fears stemming from macroeconomic headwinds.
Brent crude oil futures were down 87 cents, or 0.96 percent, to $90.05 a barrel at 1:14 p.m. Saudi time, while US West Texas Intermediate crude fell 94 cents, or 1.05 percent, to $88.29 per barrel.
Both contracts traded more than $1 lower than Tuesday’s settlement price at their intraday on Wednesday, with Brent falling to $89.83 a barrel, and WTI to $88.11 a barrel.
Prices remain under pressure from demand fears driven by macroeconomic headwinds.
“Oil prices are resuming their decline amid concerns over high interest rates for longer, hurting the demand outlook and as investors look ahead to the OPEC (Organization of the Petroleum Exporting Countries) meeting,” said Fiona Cincotta, analyst at City Index.
Saudi Arabia’s energy ministry confirmed on Wednesday it will continue its voluntary 1 million barrel per day crude supply cut until the end of this year.
Russia said it will continue its current 300,000 bpd crude export cuts until the end of the year, and will review its voluntary 500,000 bpd output cut, set back in April, in November.
Russia was also discussing partial permission for fuel exports “at all levels,” state-run TASS agency reported on Wednesday, citing Russian Energy Minister Nikolai Shulginov.
The Kremlin could be ready to ease its diesel ban in coming days, according to a daily Kommersant report on Wednesday citing unidentified sources.
A strong US dollar could also be weighing on investor sentiment.
The current dollar strength is “a rally that will continue to haunt all markets including oil, even when, as is now, there is a compelling fundamental backdrop,” PVM analyst John Evans said.
As the trade currency of oil, a strong dollar makes oil comparatively expensive for holders of other currencies, which can dampen demand.
Elsewhere, latest purchasing managers’ index data showed a score of 47.2 in September for the euro zone, edging higher from 46.7 in August. Anything below 50 implies economic contraction.