Investing.com -- Oil prices edged lower Wednesday, slipping from 10-month highs as traders banked gains after bigger-than-expected supply cuts by Saudi Arabia and Russia pointed to tighter supplies this year.
By 09:25 ET (13.25 GMT), the U.S. crude futures traded 0.2% lower at $86.48 a barrel, while the Brent contract dropped 0.4% to $89.67.
Both contracts gained over 1% in the previous session, climbing to their highest levels since November 2022.
Producers extend output cuts until year-end
The crude markets soared on Tuesday after Saudi Arabia said it will extend its current 1 million barrel per-day cut until the end of December and Russia stated it will maintain its 300,000 barrel per-day export curbs until the end of the year.
Traders had been looking at an extension of these curbs until the end of October, and the additional months are likely to tighten the markets substantially this year.
“This does leave the market with a deeper than expected deficit over the fourth quarter of 2023, which should continue to support prices,” analysts at ING said, in a note.
“Looking further ahead, we would not rule out a further extension of these cuts (fully or partially) into early next year, given that our balance sheet shows that the oil market will be in a small surplus over the first quarter of next year,” ING added.
Strong dollar weighs on oil prices
Traders are sold into these gains Wednesday as they digested the caveat that these cuts will be reviewed on a monthly basis, allowing the top producers some wiggle room.
Oil prices have also retreated because of pressure from a stronger dollar, as the greenback hit a near six-month high making the commodity more expensive for foreign buyers.
G7 shelves regular Russian oil cap review - Reuters
In other news, the G7 and allies have shelved regular reviews of the Russian oil price cap scheme, Reuters reported Wednesday, citing people familiar with the matter.
The Group of Seven countries along with the European Union and Australia imposed the price cap mechanism on Russian oil last December, followed by a cap on fuel from February.
API crude inventories due
The latest estimate of U.S. crude stock is due later in the session, with the American Petroleum Institute due ro reports its numbers a day later than usual due to the Monday holiday.
The industry body reported a massive draw of more than 11 million barrels last week as refiners maxed output ahead of the Labor Day holiday.
The API numbers serve as a precursor to official inventory data from the U.S. Energy Information Administration, or EIA, on Thursday.
(Ambar Warrick contributed to this item.)