Oil Rallies on Rising Supply Concerns
Crude oil prices rose again on Friday with supply and demand prospects in the world’s largest oil consumers. The recent price surges in the global market were triggered majorly by supply concerns caused by Saudi output restrictions.
On Friday, the international benchmark Brent crude traded at $80.64 per barrel, translating to about 1% relative to the closing price of $79.87 a barrel on Friday last week.
Similarly, the American benchmark West Texas Intermediate (WTI) saw gains while trading at $76.67 per barrel at the same time, posting a 1.6% rise from last Friday’s session that closed at $75.42 a barrel.
Both benchmarks are now poised to post gains for a fourth consecutive week.
The gross domestic product of China, the world’s largest oil-importing country, fell short of expectations, declining by around 1.7% during the previous session due to disappointing economic data. However, investors are now looking at the country’s mitigation measures to stimulate its floundering economy.
On Wednesday, the Chinese government announced plans to encourage growth in 10 sectors and bolster support for private enterprises.
As further proof of demand recovery in the country, China’s domestic production also expanded, and the country is importing oil at near-record levels. Despite sluggish domestic demand, China’s oil imports climbed 45.3% year over year in June to 12.67 million barrels, the second-highest monthly total on record.
Moderate demand upticks were also recorded in the US, the world’s biggest oil consumer.
According to data released by the Energy Information Administration late Wednesday, US commercial crude oil inventories fell by around 700,000 barrels to 457.4 million barrels, less than the American Petroleum Institute’s expectation of a fall of 2.25 million barrels.
Saudi Arabia, the world’s largest exporter of crude oil, announced its intention earlier in the month to unilaterally extend production cuts of 1 million barrels per day (bpd) through August, leaving the door open for further extensions.
Russia followed suit with an announcement of a voluntary reduction of exports.
Russian Deputy Prime Minister Alexander Novak said on Monday that Moscow will cut oil exports by 2.1 million metric tons for the third quarter, which is roughly equivalent to the pledged cuts of 500,000 bpd.
He added that Russia would cut both pipeline and seaborne oil exports in August. Meanwhile, market participants expect the effects of such supply cuts to register in the second half of the year, and push oil prices up. #Oil Rallies on Rising Supply Concerns