Brent Rises to $88 as Supply Cuts Stoke Pressure
Brent crude oil price rose sharply to about $88 per barrel in the international market this week, a surge underscored by supply cuts by members of the oil cartel, the Organisation of Petroleum Exporting Countries and allies (OPEC+).
The push seen in the week was also supported by demand optimism in the United States (US) following a significant drawdown in inventories in addition to output cut plans by the OPEC+ producers.
The crude oil market seemingly responded positively to the labour market figures, perhaps as they signal interest rates may not rise any further and even fall sooner which is better for the economic prospects of the economy over the medium term.
International benchmark Brent crude traded at $87.86 per barrel on Friday, increasing by around 4% relative to the closing price of $84.48 a barrel on Friday last week.
The American benchmark West Texas Intermediate (WTI) saw gains while trading at $84.64 per barrel at the same time, posting a 6% rise from last Friday’s session that closed at $79.83 a barrel.
Both benchmarks started the week on Monday with limited declines as investors awaited the release of economic data from the world’s largest oil consumers, the US and China.
However, the threat from Storm Idalia was moving towards Florida and posing a danger to oil production in the nearby Gulf of Mexico with possible power outages, and limited price declines.
Price increases continued on Wednesday over demand optimism in the US as prospects of further interest rate hikes in the country eased following economic data released over the week. The fall in the US crude oil inventory, reflecting strong demand in the country, supported upward price movements.
Moreover, the military coup in Gabon, a member of the OPEC, created a threat of supply disruption. A group of senior Gabonese army officers appeared on national television early Wednesday and announced that they had seized power.
However, China’s weak industrial data, which paved the way for demand worries, pressured prices. On Friday, tight global supply concerns following the news that Russia agreed on further OPEC+ cuts underpinned price increases.
Russia agreed on further curbs to its oil exports with OPEC+ partners, Russian Deputy Prime Minister Alexander Novak said, according to Russian media.
The detail of the plan is expected to be announced next week, according to a market review by separate analysts. Russia’s statement comes amid market expectations for Saudi Arabia to extend its 1 million barrel per day (bpd) oil supply cut by one month into October.
Earlier this month, Saudi Arabia stated that it would extend its existing output cutbacks of 1 bpd through September. The country originally reduced output in July and extended it through August.
Likewise, Russia announced it would continue to voluntarily reduce oil exports. It said it would reduce exports by 500,000 bpd in August and cut 300,000 bpd in September.
Oil prices have seemingly responded positively to the labour market figures, perhaps as they signal interest rates may not rise any further and even fall sooner which is better for the economic prospects of the economy over the medium term.
They’d already been on a good run though and Brent is now trading around its highest level this year, with no shortage of momentum. Very little has changed as far as oil is concerned, supply remains restricted and the market is tight.
How economies manage high interest rates will determine the next move over the remainder of the year. #Brent Rises to $88 as Supply Cuts Stoke Pressure Oil Jumps Over Big Drawdown in U.S. Inventories
#Brent #WTI
