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Oil futures bounced higher early Thursday after Saudi Arabia said it would extend a production cut for another month.
Crude was reclaiming some ground lost in the previous session after a downgrade of the U.S. credit rating dented sentiment across markets, offsetting a record drop in U.S. crude inventories.
Price action
-
West Texas Intermediate crude for September delivery
CL00,
+0.93% CLU23,
+0.93%
was up 93 cents, or 1.2%, at $80.42 a barrel on the New York Mercantile Exchange. -
October Brent crude
BRN00,
+0.82% BRNV23,
+0.82% ,
the global benchmark, gained 68 cents, or 0.8%, to trade at $83.88 a barrel on ICE Futures Europe. -
Back on Nymex, September gasoline
RBU23,
-0.76%
fell 0.9% to $2.752 a gallon, while September heating oil
HOU23,
-0.17%
was off 0.1% at $3.002 a gallon. -
September natural gas
NGU23,
+2.14%
rose 3.2% to $2.555 per million British thermal units.
Market drivers
In a statement, Saudi Arabia’s energy ministry said a voluntary production cut of 1 million barrels a day, which was implemented in July and set to run through the end of this month, would be extended to include September. The cut “can be extended or extended and deepened,” according to the statement.
Brent and WTI slumped more than 2% Wednesday, logging their biggest one-day percentage drops since June 27 despite data that showed a record 17 million barrel decline in U.S. crude inventories last week.
Analysts blamed soft sentiment about economic prospects in the wake of Fitch’s late Tuesday downgrade of the U.S. credit rating and a bounce in the U.S. dollar
DXY
with sparking a selloff after crude had previously rallied to three-month highs on signs of tightening global supplies and rising expectations over the demand outlook.
“The timing for the downgrade was poor, if not unfortunate, with traders on vacation and away from their desks as markets are thin and remain susceptible to knee-jerk reactions to the news,” said Stephen Innes, managing partner at SPI Asset Management, in a note.
A Friday meeting of an OPEC+ panel isn’t expected to recommend any changes to the output policies of the group, made up of the Organization of the Petroleum Exporting Countries and its allies, including Russia.
The Energy Information Administration is expected Thursday to report an 18-billion cubic feet (Bcf) injection to U.S. natural gas storage for the week ended July 28, according to a survey of analysts by S&P Global Commodity Insight.
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