Oil slips after Saudi-driven rally

Oil prices slid Tuesday as dealers mulled the weak demand outlook after having rallied the previous day on output cuts from key crude producer Saudi Arabia.

Europe’s Brent oil contract and US counterpart WTI crude fell more than two percent before trimming losses, one day after bouncing on news that Riyadh slashed daily output by one million barrels for July in a bid to prop up prices.

The announcement came at a weekend meeting of the 23-nation OPEC+ oil producers’ alliance, which also agreed to continue its current production cuts until the end of next year.

“Oil prices are under pressure... as the glow from Saudi’s supply cut fades and the reality of the sluggish demand backdrop sets in,” noted Victoria Scholar, head of investment at trading firm Interactive Investor.

Saxo Bank analyst Ole Hansen said the Saudi decision was initially seen as positive for oil prices as less production would tighten supplies.

But “the market chose to see it differently, basically concluding that OPEC doubts its own projections” of demand increasing by two million barrels per day in 2023, Hansen added.

Asian stocks mostly fell as investors also digested a surprise interest rate increase from the Reserve Bank of Australia (RBA).

The move sparked talk that global central banks were not yet done hiking rates to combat stubbornly-high inflation, weighing on sentiment.

The RBA lifted its main rate by 25 basis points to 4.1 percent, the highest level since May 2012.