Oil Set for Sixth Weekly Gain on Extended Supply Cuts

Credit:  Destina/AdobeStock
Credit: Destina/AdobeStock

Oil prices were on track for a sixth week of gains after Saudi Arabia and Russia, the world's second and third-largest crude producers, pledged to cut output through September.

Brent crude futures for October edged 33 cents higher to $85.47 a barrel by 1326 GMT, while U.S. West Texas Intermediate crude CLc1 for September crept up 30 cents to $81.85.

Both benchmarks were set for their longest streak of weekly gains this year. Brent has risen 15.4% and WTI by 18.2% during the last six weeks.

Saudi Arabia on Thursday extended a voluntary oil production cut of 1 million barrels per day (bpd) to the end of September, keeping the door open for another extension. Russia has also elected to reduce its oil exports by 300,000 bpd next month. 

Meanwhile, a meeting of an OPEC+ - the Organization of the Petroleum Exporting Countries and allies - ministerial panel on Friday yielded no additional changes to output policy.

"In isolation, oil looks so very good. But we have not traded in isolation for years and although we often like to feel our market is detached from the wider suite, it is not," said John Evans of oil broker PVM.  

"It is a large piece in the puzzle of global markets and while macroeconomic data deliver unfavorable growth signals, the however(s) will continue."

Those questions came in the form of the latest batch of U.S. data showing tight labor markets and a slowing service sector, raising concerns of an economic slowdown that could curb demand for oil.

Data released on Friday showed the U.S. economy maintained a moderate pace of job growth in July, but solid wage gains and a decline in the unemployment rate pointed to continued tightness in labor market conditions.

Additionally, the downturn in euro zone business activity  worsened more than initially thought in July and the Bank of England raised its interest rate to a 15-year peak on Thursday. 

Separately, an overnight Ukrainian naval drone attack on Russia's Black Sea navy base at Novorossiysk - a civilian port that handles 2% of the world's oil supply - temporarily halted all ship movements before normal operations were resumed.

(Reuters - Reporting Natalie Grover in London; Additional reporting by Arathy Somasekhar in Houston and Sudarshan Varadhan in Singapore; Editing by Jason Neely, Kirsten Donovan)

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