Oil prices saw a dip on Monday following the announcement of extended voluntary supply cuts by Saudi Arabia and Russia, which had driven prices to a 10-month high the previous week.
Last week, both Saudi Arabia and Russia revealed their commitment to prolonging voluntary supply cuts, totaling 1.3 million barrels per day (bpd) until the year’s end.
Brent crude slid by 40 cents, or 0.44% to $90.25 per barrel while U.S. West Texas Intermediate crude witnessed a loss of 65 cents, or 0.74% to $86.86.
The market’s attention shifted from concerns about Chinese economic activity last week to a focus on demand drivers this Monday.
Investors eagerly anticipated the monthly reports from the International Energy Agency (IEA) and the Organization of the Petroleum Exporting Countries (OPEC), both scheduled for release later this week.
Mukesh Sahdev, the head of downstream and oil trading at Rystad Energy, mentioned that the impact of the Saudi-led cuts would become clearer by year-end when refineries conclude maintenance and ramp up production.
“Refinery maintenance is expected to reduce crude demand by 2 million to 2.5 million bpd in September and October, but it is projected to rebound in November and December, partially offsetting the price effects of the cuts,” Sahdev added, estimating that refinery outages would peak at 10 million bpd in October.
In the realm of economic factors, all eyes are on the European Central Bank (ECB), which is set to announce its monthly interest rate decision this week. In the United States, August’s consumer price index (CPI) data is scheduled for release on Wednesday.
“The crucial economic indicator for the U.S. this week will be the US inflation data, expected to influence a wide range of assets from stocks to forex, fixed income, and commodity prices,” said Naeem Aslam of Zaye Capital Markets.