Oil falls as economic fears overshadow Saudi output cut

Oil falls as economic fears overshadow Saudi output cut

Backwardation in Brent crude oil futures steepened after the weekend announcement

By Reuters Published: Tue 6 Jun 2023, 7:57 PM

Oil prices tumbled by more than $1 a barrel on Tuesday, retreating from a strong rally in the previous session as worries over global economic growth outweighed Saudi Arabia’s pledge to deepen output cuts.

Brent crude futures were down $1.30, or 1.69 per cent, at $75.41 a barrel by 1327 GMT. US West Texas Intermediate crude fell $1.39, or 1.93 per cent, to $70.76.

Brent gained as much as $2.60 a barrel on Monday and WTI as much as $3.30 after Saudi Arabia, the world’s top exporter, said at the weekend that its output would drop by 1 million barrels per day (bpd) to 9 million bpd in July.

But weaker demand, stronger non-Opec supply, slower economic growth in China and potential recessions in the US and Europe mean the Saudi cut is unlikely to achieve a “sustainable price increase” into the high $80s and low $90s, Citi analysts said in a note on Tuesday.

Backwardation in Brent crude oil futures — where the current value is higher than in later months — steepened after the weekend announcement, with the six-month spread hitting a five-week high