By Barani Krishnan
Investing.com - Oil prices rebounded on Tuesday, a day after breaking from a powerful six-week rally, but gains were limited by Saudi Arabia’s unexpected change of mind over production cuts in July.
Uncertainty about last week’s oil balances also kept some traders on the edge, although thet consensus estimate of analysts showed positive data likely to be released by the U.S. government on Wednesday.
New York-traded West Texas Intermediate, the benchmark for U.S. crude futures, was up 32 cents, or 0.8%, at $38.51 per barrel by 2:08 PM ET (18:08 GMT). On Monday, WTI fell 3.4% in its first major slide since May 28 and more than a month it bottomed at just over $10 a barrel on April 28 from the height of the coronavirus-induced selloff.
London-traded Brent, the global benchmark for crude, was flat at $40.80, after the previous session’s decline of 3.5%.
“Oil prices are playing 'tug of war' between improving crude demand prospects and deteriorating supply-side fundamentals," said Ed Moya, analyst at New York's OANDA.
Buyers chased WTI up 300% and Brent 170% from April lows before breaking away on Monday after Goldman Sachs (NYSE:GS) — Wall Street’s most influential voice in energy trading — said the market had gotten too far ahead of demand.
Tuesday's muted rebound came after Saudi Arabia said that it would join Kuwait and the United Arab Emirates in not making additional production cuts of 1.18 million barrels per day, which the trio had committed to in July.
Just on Saturday, the Saudis — who lead OPEC and share with Russia joint stewardship of the cartel’s extended global alliance OPEC+ — said it will extend cuts into next month to take a total of 9.6 million bpd off the market. But Riyadh also warned that it will not do so if others in the pact do not keep to their cuts quotas.
OPEC aside, the market is also awaiting a snapshot from the American Petroleum Institute at 4:30 PM ET that will indicate what the U.S. Energy Information Administration will likely report as oil balances for last week.
A consensus of analysts tracked by Investing.com show that crude inventories likely fell by 1.5 million barrels for the week ended June 5, versus the decline of 2.1 million barrels in the previous week to May 29.
Gasoline stockpiles likely fell by 75,000 barrels versus the rise of 2.8 million barrels from the previous week.
Distillate balances, led by diesel, are expected to have built by 2.9 million barrels after soaring 9.9 million the previous week.