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Oil prices fall, but supply cuts keep Light around $87 per barrel

2023 09 11 mcl

Oil prices fell on Monday as a stronger dollar and economic woes in China weighed on the outlook for fuel demand, although Light crude held above $87 a barrel, helped by tighter supplies after Saudi Arabia and Russia extended supply cuts.

"Concerns about China's economic growth have weighed on sentiment in the commodity sectors," ANZ analysts said.

"The move was compounded by a stronger US dollar, which has dampened investor appetite," they added, referring to the dollar, which has risen for eight straight weeks.

Oil prices have risen for the past two straight weeks, with Light crude prices hitting their highest level since November on Friday after Saudi Arabia and Russia announced last week they would extend voluntary supply cuts of 1.3 million barrels per day. until the end of the year.

“The impact of the Saudi-led OPEC+ cuts will be more evident towards the end of the year, especially in November and December as refineries complete maintenance and increase production,” said Mukesh Sachdev, head of downstream oil trading at Rystad Energy, estimating, that refineries will stop working. will peak at 10 million barrels per day in October.

“Refinery maintenance will reduce oil demand by 2-2.5 million barrels per day in September and October, but it will recover in November and December, partially offsetting the price effect of the cuts.”

The International Energy Agency and the Organization of the Petroleum Exporting Countries (OPEC) are due to publish their monthly reports this week and any sign of strong demand is likely to push oil prices higher, ANZ analysts say.

In the United States, producers added an oil rig last week for the first time since June, Baker Hughes said in its weekly report, but the total was still down 127, or 17%, from this time last year.

WTI is likely in the process of defining a new higher range above $80 and below resistance at $90.50 in the coming weeks, with demand concerns in China and Europe limiting further upside.

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