Connect with us

Crude Oil

Saudi Arabia and Russia’s Supply Cuts Lift Oil Prices, Defying Global Economic Concerns

Voluntary cuts by Saudi Arabia and export reduction by Russia overshadow worries of economic slowdown and interest rate hikes

Published

on

Crude Oil - Investors King

Oil prices rose on Monday as Saudi Arabia and Russia, two of the world’s top oil exporters, announced significant supply cuts for August.

The move comes despite growing concerns over a global economic slowdown and the potential for further increases to U.S. interest rates.

Saudi Arabia, through its state news agency, revealed that it would extend its voluntary cut of one million barrels per day (bpd) for another month, encompassing August. In tandem with this, Russia’s Deputy Prime Minister Alexander Novak announced a reduction of 500,000 bpd in oil exports for the same period, aiming to bolster global oil prices in collaboration with Saudi Arabia.

These combined supply cuts account for 1.5% of global supply and bring the total pledged cuts by OPEC+ oil producers to 5.16 million bpd. Both Riyadh and Moscow have been striving to lift prices, with Brent crude dropping from $113 per barrel a year ago due to concerns of an economic slowdown and abundant supplies from major producers.

Despite worries over the state of the global economy, Brent crude oil witnessed a 0.6% increase, or 43 cents to $75.84 a barrel following a 0.8% gain on Friday.

Similarly, U.S. West Texas Intermediate crude rose 0.7%, or 48 cents to $71.12, building on the 1.1% increase from the previous session.

Analysts and investors are expressing a newfound optimism as the second half of the year begins, anticipating a tighter oil balance.

Tamas Varga, an analyst at PVM, said: “Investors are turning upbeat as the second half of the year kicks off; they expect tighter oil balance and buoyant equities also suggest that recession will be avoided, albeit probably narrowly.”

Earlier in the session, oil prices had fallen due to concerns arising from business surveys showing a decline in global factory activity in June. Sluggish demand in China and Europe cast a shadow over the outlook for exporters.

Also, fears of an economic slowdown affecting fuel demand were fueled by U.S. inflation continuing to surpass the central bank’s 2% target, leading to expectations of further interest rate hikes.

It is worth noting that higher interest rates could strengthen the dollar, potentially making commodities like oil more expensive for buyers holding other currencies.

However, for now, the announcement of supply cuts by Saudi Arabia and Russia has managed to outweigh these concerns and reignite a sense of optimism in the oil market.

Continue Reading
Comments

Crude Oil

Oil Prices Rise 2% on Positive Crude Inventories Data, Tight Supply Expectations

Published

on

Crude oil gains

Oil prices rose more than 2 percent on Wednesday after data showed crude and inventories fell unexpectedly last week and reports that the Organisation of the Petroleum Exporting Countries and its allies, OPEC+ may delay a planned oil output increase.

Brent crude futures settled up $1.43, or 2.01 percent, at $72.55 a barrel and the US West Texas Intermediate (WTI) crude rose $1.4, or 2.08 percent to $68.61.

The US Energy Information Administration (EIA) reported an inventory draw of a modest half a million barrels for the week to October 25.

The change in oil stocks compared with a build of 5.5 million barrels for the previous week, pressured oil prices at the time.

The American Petroleum Institute (API), meanwhile, on Tuesday reported estimated inventory draws across crude and fuels, helping prices move higher for a time. However, they remained subdued due to expectations of a ceasefire in the Middle East.

The country’s petrol stocks shed 2.7 million barrels in the week to October 25, with production at an average of 9.7 million barrels daily. These figures compared with an inventory build of 900,000 barrels for the previous week, when production stood at an average of 10 million barrels daily.

Pressure also came as the market learned that OPEC+ could delay a planned oil production increase in December by a month or more because of concern over soft oil demand and rising supply.

Traders are betting that OPEC+ will hold off on the planned increase, deferring to Saudi Arabia’s top-down approach since the country acts as the de facto leader of the group and has always stepped in to help the alliance when it is underperforming.

The group is scheduled to raise output by 180,000 barrels per day in December. OPEC+ has cut output by 5.86 million barrels per day, equivalent to about 5.7 per cent of global oil demand.

OPEC Monthly Oil Market Report downgraded demand growth for 2024 to 1.9 million barrels per day while demand forecasts for 2025 slipped another 102,000 barrels per day to 1.6 million barrels per day.

China, meanwhile, ramped up imports by 16 per cent month over month in August, but the rise still falls short of August 2023 levels, keeping a lid on demand and by extension, the market.

OPEC+ is scheduled to meet on December 1 to decide its next policy steps.

Continue Reading

Crude Oil

Crude Oil Prices Dip Further as Israel Plans End to Lebanon Conflict

Published

on

Crude oil

Oil prices extended losses on Tuesday after Israel signalled a diplomatic solution to the war in Lebanon, adding to a more than 6 per cent drop in the previous session on Monday after Israel carried out its retaliatory strike on Iran at the weekend

Brent crude futures settled down 30 cents, or 0.4 per cent at $71.12 a barrel while the US West Texas Intermediate (WTI) crude shed 17 cents, or 0.3 per cent to $67.21 a barrel.

Israel’s Prime Minister, Mr Benjamin Netanyahu will hold a meeting on Tuesday evening with ministers and the heads of the country’s military and intelligence community about talks for a diplomatic solution to the war in Lebanon.

Recall that Israel is currently embroiled in fighting with two separate groups, Hamas and Hezbollah backed by Iran in the Middle East.

Meanwhile, Iran said it will use all available tools to respond to Israel’s weekend attack. If this happens, it could create a fresh wave of tensions.

Also pressuring prices is the declining oil demand from China, the world’s largest crude oil importer, which continues to impact global oil consumption and prices.

Market analysts note that demand will return to normal growth rates after Chinese President Xi Jinping introduces new stimulus measures to the economy.

According to the American Petroleum Institute (API), crude oil inventories in the US fell by 573,000 barrels for the week ending October 25. The API reported a 1.643-million-barrel build in crude inventories for the week prior.

So far this year, crude oil inventories in the world’s largest oil producer have slumped by just over 6 million barrels since the beginning of the year, according to API data.

Official US government data from the Energy Information Administration (EIA) is expected later on Wednesday.

The US Federal Reserve will cut interest rates by 25 basis points on November 7. Lower interest rates cut the cost of borrowing, which can buoy economic activity and boost oil demand.

Continue Reading

Crude Oil

Crude Oil Prices Drop 6% as Market Overlooks Israel’s Attack on Iran Targets

Published

on

Crude Oil - Investors King

Oil prices dipped over 6 percent as the market reacted to Israel’s limited attacks on Iran on Monday.

Brent futures settled at $71.42 a barrel, down $4.63 or 6.09 percent while the US West Texas Intermediate (WTI) crude futures finished at $67.38 a barrel, $4.40 or 6.13 percent.

Over the weekend, jets from Israel completed three waves of strikes before dawn against missile factories and other sites near Tehran and in western Iran, heightening tensions in the region further.

The attacks were more tailored toward military targets – including Iran’s air defences, as well as missile and drone production, and launch facilities – easing fears that Israel might attack Iran’s nuclear facilities or oil infrastructure.

Also, Iran’s Supreme Leader Ayatollah Ali Khamenei helped cool tensions on Sunday when he signalled there would not be any direct response to Israel’s latest attacks.

The markets have been waiting for the majority of the month for a retaliation by Israel following the direct Iranian offensive against the Jewish state earlier this month. Broader Middle East tensions have continued to rise after the attack on Israel by Iran-backed Hamas on October 7 of last year.

Iran accounts for up to 4 per cent of global oil supplies, according to the US Energy Information Administration (EIA).

This development has led analysts like Citi to lower Brent’s price target for the next three months to $70 a barrel from $74, factoring in a lower risk premium in the near term.

A de-escalation that will cause markets to refocus on surplus supply and lacklustre demand, the analysts added.

The Organisation of the Petroleum Exporting Countries and its allies in OPEC+ kept oil output policy unchanged last month, including a plan to start raising output in December.

The group will meet on December 1 ahead of a full meeting of OPEC+

Even before the latest developments, Goldman Sachs had warned that there was limited upside for oil prices in 2025, citing spare capacity and weak demand.

Market attention will also turn to Hamas‑Israel and Israel‑Hezbollah cease-fire talks that resumed over the weekend.

Continue Reading
Advertisement
Advertisement




Advertisement
Advertisement
Advertisement

Trending