The terrible US service sector PMI is raising questions about the strength of the economy but oil is near unchanged on the day on a WSJ report saying Saudi Arabia might not have much spare capacity.
"Saudi Arabia is now also close to the limit of what it can pump comfortably and for a sustained period, according to people familiar with Saudi oil operations," the report says.
President Biden traveled to the Middle East last week to try an encourage more oil production but it might not be coming. Saudi Arabia's August quota is 11.004 million barrels per day but it undershot a lower target in June by 100kpd.
"People familiar with the operations say Riyadh would struggle to produce 11 million barrels a day for more than a few months at a stretch and 12 million barrels a day for more than a few weeks," the report says.
If we get July/August data and Saudi Arabia continues to miss quotas, the market may have a big rethink on oil prices.
At the same time, demand concerns are growing. In today's earnings call, Cleveland-Cliffs said European auto demand is so soft that microchips are being redirected to the US. Recent US gasoline demand numbers also showed acute demand destruction.
The next OPEC+ meeting is August 3. WTI is trading up 21-cents to $96.59.
