Oil prices diverge as market uncertainty continues - RTP pipeline maker excerpts from OilPrice.com

As uncertainty in the oil market is widespread, traders are struggling to balance economic uncertainty with continued supply cuts and rising capital costs

Although Brent crude prices briefly rose on news of further production cuts by Saudi Arabia and capacity powers, they retreated in early Wednesday trading

West Texas Intermediate (WTI) and Brent crude (Brent) prices diverged in early trading Wednesday, rising more than $1 but still below $71

PetroChina News reported on July 5 that crude oil prices had been rising after news that Saudi Arabia would extend production cuts, and started trading slightly lower on Wednesday, before WTI jumped higher while Brent crude remained lower, according to Oilprice.com.

Uncertainty in the oil market is making it difficult for traders to balance economic risks with supply cuts, although those aren't their only concerns. A new analysis by the Financial Times suggests that rising capital costs are keeping prices low while making the market more vulnerable to shocks in the future.

On the supply side, Saudi Arabia announced earlier this week that it will extend its voluntary production cut of 1 million barrels per day through August, if not longer. While the news was not a surprise, the size of the cut triggered a positive reaction from the market.

Saudi Arabia said Tuesday that this additional voluntary cut is intended to reinforce the preventive efforts of OPEC+ countries to support the stability and balance of the oil market.

Meanwhile, the capacity powerhouse said the country will reduce exports by 500,000 barrels a day next month.

The country said it will voluntarily reduce oil supplies by 500,000 barrels per day in August as part of efforts to ensure a balanced market, cutting its exports to the global market by 500,000 barrels.

Under normal circumstances, these combined news should have sent prices higher for at least a week, but the market reaction to the news lasted less than a day this week.

At the time of writing, Brent crude opened lower, while WTI was up more than a percentage point.

Mitsubishi JFG analysts told Reuters that oil prices were again under pressure as concerns lingered over a global economic slowdown and further interest rate hikes in the U.S. and Europe.

Bloomberg noted that traders will be watching Saudi Arabia's energy minister's speech at the 8th OPEC International Symposium later today to learn more about the organization's future plans.

Meanwhile, the Commonwealth Bank of Australia noted that attention may soon turn to the state of global oil inventories, as a Reuters survey expects the American Petroleum Institute (API) to report a third consecutive weekly inventory decline later today.