Oil prices saw a modest uptick on Monday, driven by expectations of ongoing supply constraints from major oil producers and optimism that the Federal Reserve will refrain from altering interest rates.
Brent crude oil, the international benchmark for Nigerian oil, inched up by 3 cents to $88.58 per barrel at 4:00 a.m. Nigerian time while the U.S. West Texas Intermediate (WTI) crude oil gained 9 cents to $85.64 per barrel.
These slight gains during Asian trading followed the previous week’s closure, where both oils achieved their highest levels in over six months after rebounding from two weeks of decline.
Sugandha Sachdeva, Executive Vice President and Chief Strategist at Acme Investment Advisors, said, “The trajectory of crude oil prices has been significantly influenced by the anticipation of additional supply reductions by major oil-producing nations, Russia and Saudi Arabia.”
However, Sachdeva also cautioned that the consistent rise in U.S. oil production could restrict further substantial price increases.
Russian Deputy Prime Minister Alexander Novak revealed that Russia had reached an agreement with OPEC partners on the specifics of extended export cuts.
An official announcement detailing these planned cuts is expected later this week.
Russia had previously committed to a 300,000 barrels per day (bpd) reduction in exports for September, following a 500,000 bpd cut in August while Saudi Arabia is similarly anticipated to extend a voluntary 1 million bpd reduction into October.
During the APPEC conference in Singapore on Monday, Russell Hardy, CEO of Vitol, projected that the global crude market would experience a decrease in tightness over the next six to eight weeks due to refinery maintenance.
However, he emphasized that supplies of sour crude, characterized by higher sulfur content, would remain scarce.
Hardy remarked, “Due to the OPEC+ cuts, there isn’t enough supply of sour crude for the complex refineries in India, Kuwait, Jizan, Oman, and China.”
Also Read: Investors in Nigeria’s Stock Market Gain N1.411 Trillion in August
In the United States, job growth gained momentum in August even though the unemployment rate edged up to 3.8% and wage growth moderated. This suggests that labor market conditions are cooling, reinforcing the expectation that the Federal Reserve will abstain from raising interest rates this month to avoid further dampening the economy.
Meanwhile, in China, manufacturing activity unexpectedly expanded in August as indicated by data from Caixin’s manufacturing PMI survey. This development alleviated some pessimism regarding the economic health of the world’s largest oil importer.
Beijing’s recent announcement of economic support measures, including deposit rate cuts at major state-owned banks and eased borrowing rules for home buyers, has also provided support to oil prices.
Nonetheless, investors continue to anticipate more substantial actions to revitalize China’s beleaguered property sector, which has been a major drag on the country’s economy since emerging from the pandemic.
