Oil prices saw marginal gains, with Brent crude November futures rising by 3 cents to reach $88.58 a barrel, while US West Texas Intermediate crude (WTI) October futures increased by 9 cents, reaching $85.64 a barrel. These slight improvements followed a week where both contracts closed at their highest levels in over six months.
The main driving force behind these price increases is the expectation of further supply cuts by major oil-producing nations, particularly Russia and Saudi Arabia. Russia’s Deputy Prime Minister, Alexander Novak, announced that Russia had reached an agreement with OPEC partners regarding continued export reductions. Details of these planned cuts are anticipated to be officially disclosed later in the week.
Russia had already committed to reducing exports by 300,000 barrels per day (bpd) in September, following a 500,000 bpd cut in August. Saudi Arabia is also expected to extend its voluntary 1 million bpd cut into October.
While the prospect of supply cuts has provided support for oil prices, analysts are mindful of the continuous increase in US oil production, which could potentially limit substantial price gains.
On the demand side, China’s manufacturing activity unexpectedly expanded in August, offering a glimmer of optimism for the world’s largest oil importer. Additionally, recent economic support measures announced by Beijing, including deposit rate cuts and eased borrowing rules, have contributed to price stability.
However, investors remain cautious about the Chinese property sector, which has been a drag on the nation’s economy since the pandemic. They are waiting for more substantial actions to support this struggling sector.