Global oil prices rose to new record highs on the back of drop in global oil supplies following Saudi Arabia and Russia decision to cut crude oil production.
Brent crude oil, against which Nigerian oil is priced, grew by 54 cent or 0.6% to $86.71 a barrel while the U.S. West Texas Intermediate (WTI) crude oil saw a gain of 51 cents, or 0.6% to $83.43 a barrel.
Saudi Arabia, the largest crude oil producer among OPEC nations, recently extended its voluntary production cut by 1 million barrels per day until September to prop up oil prices. Shortly after Russia announced similar decision to curtail oil exports by 300,000 barrels per day throughout September.
While this has helped bolster oil prices in recent weeks, the surge in U.S. crude oil inventories dragged on the overall outlook of crude oil and other commodities.
Charalampos Pissouros, a senior investment analyst at broker XM, explained, “The current resurgence can largely be attributed to the commitment of major producers, such as Saudi Arabia and Russia, to uphold supply limitations for an extended period.”
Crude posted its sixth consecutive weekly gain last week helped by a reduction in OPEC+ supplies and hopes of stimulus boosting oil demand recovery in China. “There is no doubt that there is plenty of momentum here,” said Naeem Aslam, chief investment officer at Avatrade. “The clear trend seems to be skewed to the upside.”
On Tuesday, Saudi Arabia’s cabinet said that it reaffirms its support for precautionary measures by the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, to stabilise the market, state media reported.
Scroll to continue Some bearish pressure came from American Petroleum Institute (API) figures on Tuesday, which according to market sources showed U.S. crude stocks rose by 4.1 million barrels last week, although gasoline and distillate inventories fell. Official U.S. Energy Information Administration inventory figures are out at 1430 GMT.
On Tuesday, oil also came under pressure from Chinese data showing crude oil imports in July fell 18.8% from the previous month to their lowest daily rate since January, although they were up 17% from a year earlier.”