Investing.com -- Oil prices traded higher Tuesday as the decision by a series of top producers to cut supply has boosted sentiment, overshadowing concerns over slowing manufacturing activity.
By 04:50 ET (08:50 GMT), U.S. crude futures traded 1% higher at $70.47 a barrel, while the Brent contract rose 0.9% to $75.31 a barrel.
Top exporters reduce supplies
Saudi Arabia announced on Monday that it would extend its voluntary cut of one million barrels per day to August, Russia agreed to reduce its oil exports by 500,000 barrels per day in August, while Algeria chipped in with a more modest 20,000-barrel-a-day reduction.
This news had a limited impact on Monday but has tended to create a floor for oil prices, boosting sentiment even as data showed deteriorating manufacturing activity in China, the U.S., and much of Europe.
“The Saudi cut was largely expected, and in fact, failing to roll over the cut would have put further downward pressure on the market. This leaves the Saudis in a difficult spot for the next few months, as they will have to be careful how they wind down this supply cut in the current environment,” said analysts at ING, in a note.
“Although the Russian announcement was a surprise, there will be doubts within the market over whether Russia will actually make the cuts or not. Their track record this year has not been great.” ING added.
U.S. holiday limits trading ranges
The Independence Day holiday in the U.S. will limit trading activity on Tuesday, as traders await more data assessing the health of the U.S. economy, the largest consumer in the world.
The minutes of the Fed’s June meeting are due on Wednesday, and traders will be looking for clues after the central bank kept interest rates on hold last month, but flagged at least two more hikes this year.
Friday also sees the release of nonfarm payrolls data for June, which is also expected to factor into the Fed’s plans for interest rates.
Non-policy OPEC meeting in focus
The Saudi and Russian supply cuts come just before a conference held by the Organization of Petroleum Exporting Countries and allies this week.
Chief executives from major global oil firms are set to meet with energy ministers from the OPEC states on Wednesday and Thursday, potentially offering more cues to oil markets.
That said, as a non-policy meeting, an announcement about future supply levels is unlikely.