Investing.com -- Crude oil prices retreated Monday, handing back some of the recent strong gains in the wake of the decision of top producers Saudi Arabia and Russia to extend their output cuts.
By 08:50 ET (12.50 GMT), the U.S. crude futures traded 0.8% lower at $82.17 a barrel, while the Brent contract dropped 0.8% to $85.59.
Both benchmarks recorded their sixth consecutive weekly gains last week to four-month highs, having posted double-digit gains over the last month.
Caution ahead of key inflation data
However, traders have decided to take some of these recent gains off the table at the start of the new week, amid caution ahead of some key inflation data in the U.S. and China.
U.S. consumer price index inflation is expected to have increased slightly in July, remaining above the Federal Reserve’s target range and potentially attracting more hawkish measures from the central bank.
On the other hand, Chinese inflation is expected to have declined further in July, heralding more near-term weakness in the world’s largest oil importer, as a post-COVID economic recovery runs dry.
Chinese trade data, due on Tuesday, is also expected to provide more insight into crude demand in the country. China’s oil imports have remained close to record highs this year.
Production cut extensions boost sentiment
That said, the underlying tone has been boosted by last week’s decisions by Saudi Arabia and Russia to extend their production cuts into September, raising hopes that tightening supplies will offset a potential slowdown in demand this year.
Saudi Arabia will keep trimming production by 1 million barrels per day and Russia will cut oil exports by 300,000 barrels a day, the countries confirmed on Thursday ahead of a meeting of the Organization of Petroleum Exporting Countries and allies the following day.
Saudi Arabia “further assured the market that the cuts could be prolonged further or even deepened if required to balance the market,” analysts at ING said, in a note.
More Chinese stimulus eyed
Expectations of more stimulus measures in major oil importer China have also aided sentiment, although economic data continued to paint a bleak picture for the Asian giant.
“Higher crude oil prices, ample domestic inventory and a slower economy could weigh on Chinese demand over the coming months. However, stimulus or supportive measures from Beijing could help improve the demand outlook for the rest of the year,” ING added.
(Ambar Warrick contributed to this article.)