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By Roland Jackson
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. news online
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.
Saudi glow fades
“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 that the Saudi decision was initially seen as positive for oil prices as less production would tighten supplies.
But then “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 said.
Asian stocks mostly fell as investors also digested a surprise interest rate increase from the Reserve Bank of Australia (RBA).
That sparked talk that global central banks were not yet done hiking to combat stubbornly-high inflation.
The RBA lifted its main rate by 25 basis points to 4.1 percent, which was the highest level since May 2012.
In reaction the Australian dollar jumped more than one percent against the greenback, which traded mixed against the euro and yen.
“The RBA’s surprise decision…(was) a warning that the major central banks are not done tightening yet,” SwissQuote analyst Ipek Ozkardeskaya told AFP.
“That, combined to the overbought conditions in stock markets, weighs on sentiment.
“We will likely step into a period of profit taking after such a breath-taking and unexpected rally.”
But after starting in the red, equities in Europe and on Wall Street pushed higher for the most part.
Investors “catch their breath”
The tepid rebound came after a global advance stumbled Monday, with a below-par read on US services sector activity hinting at weakness in a key area of the economy.
“After a brief rally since the end of last week, markets have taken a moment to catch their breath,” said AJ Bell investment director Russ Mould.
Traders have been broadly upbeat after a “Goldilocks” jobs report Friday that was neither too good nor too bad suggested the economy was not facing an immediate risk of a recession and could still give the Federal Reserve room to hold monetary policy next week.
There is a growing hope that the central bank will decide against a hike but flag a resumption in July as officials try to bring inflation down while limiting damage to the economy and the troubled banking sector.
Shares in Coinbase tanked more than 19 percent before trimming losses after US securities regulators sued the cryptocurrency platform, alleging that its failure to register as a securities exchange venue exposed investors to risk.
The move followed US regulators charging cryptocurrency giant Binance with securities law violations on Monday.
Bitcoin slumped more than four percent to around $25,500.
Shares in Apple slid 0.9 a day after the company unveiled the Vision Pro, its first mixed reality headset, with a price tag of $3,499.
Key figures around 1330 GMT
Brent North Sea crude: DOWN 0.3 percent at $76.47 per barrel
West Texas Intermediate: DOWN less than 0.1 percent at $72.09 per barrel
New York – Dow: DOWN less than 0.1 percent at 33,549.95 points
London – FTSE 100: UP 0.4 percent at 7,209.00 (close)
Frankfurt – DAX: UP 0.2 percent at 15,992.44 (close)
Paris – CAC 40: UP 0.1 percent at 7,209.00 (close)
EURO STOXX 50: UP less than 0.1 percent at 4,295.22 (close)
Tokyo – Nikkei 225: UP 0.9 percent at 32,506.78 (close)
Hong Kong – Hang Seng Index: DOWN 0.1 percent at 19,099.28 (close)
Shanghai – Composite: DOWN 1.2 percent at 3,195.34 (close)
Euro/dollar: DOWN at $1.0694 from $1.0713 on Monday
Dollar/yen: UP at 139.69 yen from 139.58 yen
Pound/dollar: DOWN at $1.2415 from $1.2438
Euro/pound: DOWN at 86.12 pence from 86.13 pence
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