Energy markets saw oil prices climbing 2% with Brent crude futures settling $1.60 higher at $76.25 a barrel.
Saudi Arabia on Monday said it would extend its voluntary output cut of 1 million barrels per day (bpd) to August while Russia and Algeria volunteered to lower their August output and export levels by 500,000 bpd and 20,000 bpd, respectively.
If fully implemented, that would bring a combined reduction of 5.36 million bpd from August 2022, and possibly even more.
The total cuts now stand at more than 5 million bpd, or 5% of global oil output.
However, markets will wait to verify announced cuts.
Also, concerns continue for high interest rates that will weigh on global demand.
Business surveys have shown a slump in global factory activity because of sluggish demand in China and Europe, and U.S. manufacturing also fell further in June.
This broader uncertainty is likely to overshadow OPEC+ efforts to tighten supply.
On this morning, oil benchmark Brent fell, reversing some of yesterday gains.
Brent indeed was down 46 cents, or 0.6%, at $75.79 a barrel by 07:04 GMT.
U.S. West Texas Intermediate (WTI) crude futures were at $70.86 a barrel, up $1.07, or 1.5%, from Monday’s close, having traded through a U.S. holiday to mark Independence Day without a settlement.
A private sector survey on Wednesday showed China’s services activity expanded at the slowest pace in five months in June, as weakening demand weighed on the post-pandemic recovery momentum.
The market is also awaiting minutes from the June 13-14 meeting of the Federal Open Market Committee (FOMC) later on Wednesday for further clues on the U.S. central bank’s outlook.
In this context, investors remained concerned about oil demand, therefore, they will be looking for demand cues from industry data on U.S. crude and product inventories from the American Petroleum Institute later on Wednesday and government data on Thursday, both delayed by a day due to the U.S. holiday.
U.S. crude inventories were expected to fall by about 1.8 million barrels in the week to June 30, which would mark a third straight week of declines.
The Baltic Exchange’s main sea freight index on Tuesday fell to its lowest level in nearly four weeks, pressured by a dip in the larger capesize and panamax vessel segments.
The overall index, indeed, fell 24 points, or 2.3%, to 1,044 – its lowest level since June 8.
Notably, the capesize index dipped 50 points, or 3%, to 1,601, declining for the seventh straight session.
Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, decreased $413 to $13,279.
The panamax index shed 26 points, or 2.6%, to a more than four-month trough at 988.
Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, decreased $239 to $8,891.
Among smaller vessels, the supramax index was unchanged at 747.
Asian markets sank, after Chinese industrial activity survey, showed Caixin’s purchasing managers’ index for services fell to 53.9 from May’s 57.1 on a 100-point scale on which numbers above 50 show activity increasing.
It was the weakest reading this year.
Growth in factory activity also slowed, and it is a problem as China is the biggest trading partner for all of its Asian neighbors.
However, economic activity accelerated to 4.5% in the first three months of 2023 from last year’s 3%.
China’s No. 2 leader, Premier Li Qiang, said last month growth was improving.
He gave no details but expressed confidence China can hit this year’s official growth target of “about 5%.”
Meantime, traders are uneasy about U.S.-Chinese tensions over technology trade after Beijing announced restrictions on exports of gallium and germanium.
In this context, the Shanghai Composite Index fell 0.4% to 3,231.08 and the Hang Seng in Hong Kong sank 1.2% to 19,185.13.
Tokyo’s Nikkei 225 lost 0.4% to 33,303.00 and the Kospi in Seoul retreated 0.4% to 2,585.16.
Sydney’s S&P-ASX 200 shed 0.3% to 7,255.80.
New Zealand and Southeast Asian markets declined.
The U.S. dollar drifted near the middle of its range of the past three weeks against major peers, with the dollar index down 0.1% to 102.99, after tracking between 103.75 and 102.75 since early June.
Moves, however, were largely muted due yesterday holiday.
Notably, the yen edged up 0.1% to 144.59 per dollar, just a touch below 145.07, which was its weakest in eight months as fears of official intervention took hold.
The euro edged 0.2% higher to $1.0898, adding to its 0.34% overnight decline.