Crude Oil Production Cuts Announced by Saudi Arabia to Turnaround the Persistent Bearish Rally of June 2023

Texas (USA): As per the recent evaluation, WTI crude oil has experienced a downward trend in the first week of June 2023 as it has witnessed the decline of 2.74% to settle at USD 70.14/barrel along with the other crude oil prices including Brent, Murban simultaneously due to the fewer demand basis globally.

The rumoured media report stated a US- Iran enclosing deal regarding the sufficient supply of crude oil globally which has resulted in drop prices.

Surprisingly, Saudi Arabia being the largest exporter of crude oil globally which upholds the major share of OPEC+ has announced to cut down the oil production of another one million barrels per day(bpd) effective from July 2023 to cover its importing bills and government spendings. Despite the fact, the crude oil prices are expected to remain weak in the month of June as the other OPEC+ counties including Russia were not agreed to the proposal. Also, one of the ministers have stated the fact that prices may fluctuate but nor rise majorly amid soft demand.

Meanwhile, U.S. fuel stocks rose by about 8 million barrels and China being the substantial importer of crude oil, importing lesser due to slowing manufacturing sector resulted in easing demand pressure over crude oil price. The higher interest rates, strengthening dollar, which effectively contributed to expensive commodities and hence, lowered the demand of oil in other countries altogether to sluggish economic recovery.

Moreover, in the last few months, investors sentiment has largely been pessimistic and the selling off their assets such as commodities out of fear of economic uncertainties have been witnessed globally. Big corporations have been laying off a substantial piece of their workforce under the grab of cost effectiveness. These developments are stark reminders of growing uncertainties in the global economy.

After Russia invaded Ukraine, transportation by sea, was stopped by European countries to import the Russian oil. This has skyrocketed the oil prices. However, by 2023, the prices were rebounded as the Russia is now exporting more crude oil to Asia pacific region.

In conclusion, the demand outlook in the short term appears largely pessimistic with consumption from China will be a key focal point determining the prices. However, as per several experts, the major demand turnaround may take place towards the end of Q3 and first half of Q4 where traditionally Asia Pacific market observe sharp boost in consumption rates. These months conventionally observe festive season in critical countries like India, China, and Japan. Furthermore, output cuts announced by Saudi Arabia may also play pivotal role determining the fate of crude oil prices in the first half of the upcoming month.