(Bloomberg) – Oil was little changed at the start of the second half as traders focused on demand challenges and complex supply prospects.
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Brent crude held above $75 a barrel after capping a streak of four quarterly losses last week, the worst streak for the global benchmark in data dating back more than three decades. So far this year, prices have fallen around 12% as the Chinese recovery falters, traders fear a potential recession in the United States and robust exports from Russia and Iran have kept the plentiful supply.
The third quarter is seen by many market watchers as a critical time when the physical market could tighten. Saudi Arabia, leader of OPEC+, which brings together the Organization of the Petroleum Exporting Countries and its allies, is expected to extend a unilateral production cut of 1 million barrels per day by a month in August. This additional reduction is in addition to the main production brakes that Riyadh was already doing with other producers in the cartel.
The U.S. Department of Energy plans to seek more oil purchases this week as part of a campaign to replenish the strategic petroleum reserve, which was depleted last year amid the unrest following the invasion of Ukraine by Russia. The United States had previously said it would buy 12 million barrels to help fill reserves.
“At the start of the third quarter, oil prices may remain dependent on demand concerns, but OPEC’s supply cut will begin to take hold and may be extended into August,” said Charu Chanana, market strategist for Saxo Capital Markets Pte. in Singapore. “The filling of the US SPR is also likely to gain momentum and maintain the demand outlook.”
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