(Reuters) -Oil prices edged lower following a protracted rally, but retained support from pledges by top producers Saudi Arabia and Russia to extend supply cuts through September.
Both global benchmarks notched up their sixth consecutive weekly gains last week.
On Monday, Brent crude futures slipped 63 cents to $85.61 a barrel by 1217 GMT, while U.S. West Texas Intermediate crude was at $82.17 a barrel, down 65 cents. WTI dipped by $1 earlier in the session.
Today traders are booking some profits, said Naeem Aslam, chief investment officer at Zaye Capital Markets.
“But given the voluntary extension of supply cuts…the base case scenario is that we will see a deficit in the market, which is going to continue to push oil prices higher.”
The world’s top exporter Saudi Arabia on Thursday extended its voluntary production cut of 1 million barrels per day (bpd) to the end of September, and said more could follow.
In line with production cuts, Saudi Aramco (TADAWUL:2222) raised on Saturday the official selling prices for most grades it sells to Asia for a third month in September.
Russia added to the supply tightness with its announcement it will cut oil exports by 300,000 bpd in September.
Given these additional cuts and estimates of significant depletion in oil inventories in the coming months, PVM analyst Tamas Varga said “the fundamental backdrop becomes blatantly encouraging”.
He added the underlying global macroeconomic backdrop was also positive despite the U.S. rating downgrade last week.
Chinese economic data this week, however, will be in focus as the market seeks to gauge Beijing’s appetite for more stimulus measures to support the world’s second largest economy.
Investors will also monitor the U.S. consumer price reading on Thursday that could offer clues on the Federal Reserve’s monetary policy, after an employment report on Friday reignited fears the central bank could keep rates higher for longer.
Separately, risks to supply could increase as Russia-Ukraine tensions heighten in Black Sea ports.
Last week, a Russian warship was seriously damaged in a Ukrainian naval drone attack on Russia’s naval base at Novorossiysk. The port handles 2% of the world’s oil supply, but has since resumed operations.
