Oil Prices Rise as Saudi, Russia Cut Offset Weak Demand
After closing negative in the just concluded week, the global crude oil prices were up as tight supply expectations offset weak demand forecast. The global supply concerns on account of lower output from members of the Organisation of Petroleum Exporting Countries and allies (OPEC+) – Saudi Arabia and Russia.
Data from the oil market showed that the international benchmark Brent crude traded at $85.45 per barrel. This translates to a 0.77% increase from the closing price on Friday of $84.80 per barrel. Also, the American benchmark West Texas Intermediate (WTI) traded at $81.31 per barrel, up 0.81% from the session close of $80.66 per barrel.
According to market reports, both crude oil benchmarks posted significant losses last week over fears of a slowdown in economic growth in China and the expectation of further interest rate hikes in the United States.
However, tight global supply concerns again underpinned price increases on Monday. OPEC+ crude exports are expected to fall for a second month in August after production cuts from Russia and Saudi Arabia.
Earlier this month, Saudi Arabia said it would extend its output cutbacks of 1 million barrels per day (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. Meanwhile, the oil rig count in the US decreased by five last week, according to the latest data released by oilfield services company Baker Hughes on Friday.
The number of oil rigs, an indicator of short-term production in the country, fell to 520 for the week ending Aug. 18. The number of US oil rigs declined by 81 compared to one year ago. Last week, crude oil prices declined over 3% on fears of a slowdown in economic growth in China, the world’s largest oil importer, and the expectation of further interest rate hikes in the US.
International benchmark Brent crude traded at $83.53 per barrel on Friday, decreasing by 3.1% relative to the closing price of $86.21 a barrel on Monday. Similarly, the American benchmark West Texas Intermediate (WTI) saw losses while trading at $79.83 per barrel at the same time, posting a 3.25% drop from Monday’s session that closed at $82.51 a barrel.
Bearish data from China, the world’s second-largest crude oil consumer, continues to weigh on oil prices. Investors are weary amid weak retail sales and industrial production data in the country, which reflects the fragility of the country’s economic recovery.
China, the top global importer of crude oil, iron, steel, copper, and coal saw declines in these imports during the first seven months of the year. Furthermore, annual consumer inflation in the US, the world’s largest oil consumer, is exerting pressure on oil prices by raising inflationary concerns with the prospect of another interest rate hike.
Market players expect fresh rate hikes following the minutes of the Federal Open Market Committee on July 25–26, when it was revealed that some members believe rate hikes will neutralize the threat of inflation.
Meanwhile, data showing a demand surge in the US is curtailing the rise in oil prices. Crude oil inventories fell by around 6 million barrels to 439.7 million barrels, according to the Energy Information Administration’s data released mid-week. #Oil Prices Rise as Saudi, Russia Cut Offset Weak Demand Naira Gains 10% in Parallel Market, I&E Rate Settles at N739.52