© Reuters. FILE PHOTO: An aerial view shows Shibushi National Petroleum Stockpiling Base in Kagoshima prefecture, Japan January 18, 2019, in this photo taken by Kyodo. Picture taken on January 18, 2019. Mandatory credit Kyodo/via REUTERS/File Photo

By Natalie Grover

LONDON (Reuters) -Oil prices climbed 2% on Tuesday as markets weighed August supply cuts by top exporters Saudi Arabia and Russia against a weak global economic outlook.

Saudi Arabia on Monday said it would extend its voluntary output cut of 1 million barrels per day (bpd) to August while Russia and Algeria volunteered to lower their August output and export levels by 500,000 bpd and 20,000 bpd, respectively.

If fully implemented, that would bring a combined reduction of 5.36 million bpd from August 2022 – possibly even more because several countries in the OPEC+ producer group are unable to fulfil their output quotas, said PVM analyst Tamas Varga.

The total cuts now stand at more than 5 million bpd, or 5% of global oil output.

On Tuesday, futures settled up $1.60 at $76.25 a barrel. U.S. West Texas Intermediate crude was trading $1.44 higher at $71.23.

“Clearly, the Saudis are taking proactive and pre-emptive steps to stabilize the price of as well as see gains to reach $80 a barrel to sustain their domestic budgets,” said Andrew Lipow, president of Houston-based Lipow Oil Associates.

Even so, the market will wait to verify Russia’s announced cuts, and concerns continue that high interest rates will weigh on global demand, Lipow said.

Oil benchmarks settled about 1% down in the previous session, as a gloomy macroeconomic outlook served to erase early gains.

U.S. markets were closed on Tuesday for the Independence Day holiday.

Little has changed in oil dynamics despite Monday’s announcements, said OANDA analyst Craig Erlam. “Only a significant break above $77 will suggest something has changed, otherwise range-bound trade could well continue.”

Business surveys have shown a slump in global factory activity because of sluggish demand in China and Europe, and U.S. manufacturing also fell further in June to levels last registered in the first wave of the COVID-19 pandemic.

This broader uncertainty is likely to overshadow OPEC+ efforts to tighten supply, some analysts said.

Even before the latest cut announcements, International Energy Agency (IEA) data suggested the oil market was set to show a supply deficit of roughly 2 million bpd in the third and fourth quarters, Commerzbank (ETR:) analysts said.

Oil prices did not jump significantly on the news, largely because of demand concerns over China’s sluggish economic recovery after the lifting of pandemic restrictions. Meanwhile, interest rates in the U.S. and Europe are expected to rise further to address persistently high inflation, the analysts said.