The August crude oil contract started the new month closing down 85 cents per barrel (bbl) at $69.69, and September closed down 87 cents at $69.97. September Brent crude closed down 76 cents at $74.65. Markets reacted strongly after the Saudi/Russian oil cut announcement early Monday morning, then fell back after the monthly Institute for Supply Management (ISM) report showed the U.S. index came in at 46% and 0.9 percentage points lower than May and below trade expectations of 47.3%. The June factory index was the lowest seen since May 2020.
The early strength in the market came from Saudi Arabia and Russia announcing Monday that they would make additional cuts to oil supply as a global economic slowdown hangs over the outlook for energy demand. CNN reported that Saudi Arabia said it would extend a cut of 1 million barrels a day in its oil production at least until the end of August. The cut, which took effect on Saturday, was initially planned to last for the month of July in an attempt to shore up oil prices.
"This additional voluntary cut comes to reinforce the precautionary efforts made by OPEC+ countries with the aim of supporting the stability and balance of oil markets," the Saudi Press Agency quoted an official source in the Ministry of Energy as saying Monday.
CNN added that "Saudi Arabia needs Brent crude to trade at around $81 a barrel in order to balance its budget, according to the International Monetary Fund. The kingdom has slipped back into a budget deficit this year after reporting a surplus in 2022 for the first time in almost a decade."
August RBOB closed down 8.25 cents at $2.4624, and September RBOB was down 7.14 cents at $2.3911, ending lower with the loss in crude oil. The July 3 AAA national average gas prices are $3.535 per gallon for regular, diesel is $3.842 and E85 is $2.910. AAA forecasted that a record 43.2 million people will be traveling by car during the July 4 holiday.
Mary Kennedy can be reached at email@example.com