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Energy stocks outperformed the broader market Tuesday, as crude oil closed near $83/bbl with potential disruptions to Russian supplies outweighing more indications of a deepening economic slowdown in China.
Crude prices rebounded from early losses after Ukraine President Zelenskiy warned his country would retaliate if Russia continues to block Ukrainian ports, triggering buying in the futures market as traders weighed the possibility of supply disruptions.
Saudi Arabia also reaffirmed its commitment to continue its voluntarily production cuts of 1M bbl/day next month.
Crude was dropping in early trading after China’s government reported oil imports fell to a six-month low of 10.33M bbl/day in July, plunging 29% from June.
Overall, China’s imports contracted by 12.4% in July, far steeper than the expected 5% drop, and exports fell 14.5%, compared with a 12.5% decline expected by economists.
Front-month Nymex crude (CL1:COM) for September delivery closed +1.2% to $82.92/bbl, its best settlement since April 12, and October Brent crude (CO1:COM) finished +0.9% to $86.17/bbl.
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Some analysts are skeptical about how much supply the Saudi cuts actually were removing from the market, as other OPEC members such as Libya and Venezuela have increased production.
“The production cuts have been far less than the announced quota cuts,” according to Andrew Lipow, president of Lipow Oil Associates.
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