Reuters – Oil prices rose on Monday to their highest levels seen in mid-April as top oil producers, Russia and Saudi Arabia pledged to continue keeping supplies down; tightening the global markets for another month to further support oil prices.
Russia, on Thursday said that it would cut crude oil exports by 300,000 barrels per day in September. Adding to it, over the course of the weekend, Ukraine launched a maritime drone attack on Russia’s Novorossiysk port, a crucial point for Russian oil exports at Black Sea, further aggravating the situation. However, the port that handles 2% of global oil supplies has resumed operations.
Moreover, the largest oil exporter in the world, Kingdom of Saudi Arabia, announced on Thursday the extension in its voluntary production cut of a million barrels per day of crude oil till the end of September. The state-owned Saudi Press Agency, was heard saying that the cut “can be extended or extended and deepened,” which has been in place since July.
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In line with the production cuts from both the countries, the state-owned Saudi Aramco raised the official selling prices for most grades of oil to Asia for a third consecutive month. This trend was also witnessed in the global bench-mark Brent futures that is trading at $86.14/barrel, the highest since mid-April. Though US west Texas intermediate saw a slight dip of 0.1% in its prices; it still trades at mid-April levels, making it sixth-consecutive weekly uptick for both the contracts.
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What’s next?
Tina Teng, an analyst at CMC Markets, said Crude oil prices have been strengthened by continuous tapering off in the expectations of US interest rate, hopes of a stimulus package boosting the demand from China, and a reduced production from OPEC. However, she was off the view that the prices are nearing its April resistance level.
Another analyst from IG market, further analyzed the situation in upcoming days and said a sustained break for WTI moves to $84.00 a barrel it would then open a gates towards $93.50. The global head of commodity research, Morse, had a similar view that Saudi Arabia and Russian output is “likely to come back” after September, and that oil prices will hit approximately $90 per barrel at most this quarter.
However, he is not much optimistic about a significant demand growth in the upcoming weeks predicting that there won’t be “this huge incremental spurt in Chinese demand.” Thus, investors will have to keep a close look out on the Chinese economy and the stimulus measures that Beijing is likely to take.
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