Oil prices set for sixth weekly gain on pledged output cuts

SINGAPORE, Aug 4 (Reuters) – Oil prices rose for a second day on Friday, set for their sixth week of gains, after Saudi Arabia and Russia, the world’s second and third-largest crude producers, pledged to cut output through next month.

Brent crude futures for October rose 2 cents to $85.16 a barrel by 0609 GMT, while U.S. West Texas Intermediate crude for September rose 9 cents, or 0.1%, to $81.64.

Both benchmarks were on track for a sixth week of gains, their longest streak of weekly gains this year. Brent has risen 15.4% and WTI by 18.2% during the last six weeks.

Saudi Arabia on Thursday extended a voluntary oil production cut of 1 million barrels per day (bpd) to the end of September. Russia will also slash its oil exports by 300,000 bpd in September, its Deputy Prime Minister Alexander Novak said.

The Joint Ministerial Monitoring Committee of OPEC+ is unlikely to tweak its overall oil output cuts at its meeting on Friday, sources have said. But the extension of Saudi Arabia’s reductions and comments by Russia ahead of the OPEC+ meeting have raised supply concerns, supporting prices.

However, the latest batch of U.S. data showing tight labor markets and a slowing service sector has triggered some worries that an economic slowdown would curb demand for oil and pressure prices lower, even with the supply cuts.

“A strong dollar has weighed on crude prices and everyone wants to know if a hot labor market will force the Fed to tighten policy even further,” said Edward Moya, an analyst at OANDA, referring to the U.S. Federal Reserve potentially raising interest rates.

Additionally, the downturn in euro zone business activity worsened more than initially thought in July and the Bank of England raised its interest rate to a 15-year peak on Thursday. Higher borrowing costs for businesses and consumers could slow economic growth and reduce oil demand.

However, an improved demand outlook and tighter supply could continue to buoy the oil markets, said Tina Teng, an analyst at CMC markets.

“The upcoming US non-farm payroll (data) will be in focus, and steer market sentiment tonight,” Teng said, referring to data on U.S. employment.

Reporting by Arathy Somasekhar in Houston and Sudarshan Varadhan in Singapore; Editing by Christian Schmollinger & Simon Cameron-Moore

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