Oil prices increased on Monday due to tightening global supply resulting from lower exports by major oil-producing countries like Saudi Arabia and Russia. This positive factor managed to offset concerns about global demand growth due to high interest rates.
- Brent crude rose by 61 cents to reach $85.41 a barrel.
- U.S. West Texas Intermediate (WTI) crude was at $81.88 a barrel, up by 63 cents.
Both benchmark prices experienced a 2% weekly loss last week, ending their 7-week winning streak, primarily due to the strengthening of the U.S. dollar, which made oil purchases more expensive for holders of other currencies.
According to Warren Patterson, head of commodities research at ING, the tight oil balance anticipated for the remainder of the year suggests that prices could continue to rise. Additionally, a slight weakening of the U.S. dollar is providing some support to oil prices, as they often move inversely to the dollar’s strength.
On the supply side, OPEC+ (Organization of the Petroleum Exporting Countries and allies) crude exports are expected to decline for a second consecutive month in August. Furthermore, China, the world’s largest crude importer, is tapping into record inventories built up earlier this year, which has led Chinese refiners to scale back purchases.
While concerns about global demand persist due to economic uncertainties and high interest rates, the supply constraints driven by OPEC+ actions and decreasing rig counts in the U.S. have contributed to upward pressure on oil prices.
Stefano Grasso, a senior portfolio manager at 8VantEdge, stated that as long as there is no economic recession leading to reduced demand, OPEC+ will likely maintain control over the oil market.