Oil prices rose marginally, amid volatile trading, today, Wednesday, July 19 (2023), on the back of fears of an economic recession with a shortage of supplies.
The markets are facing fears of a decline in US demand in exchange for China’s pledge to support economic growth, tightening Russian supply, and a decline in US inventories.
Oil prices received support during the previous session, with the US Energy Information Administration expecting a decrease in shale oil production in the United States by 18 thousand barrels per day during next August, to be the first drop since December 2022.
Oil prices today
By 06:40 a.m. GMT (09:40 a.m. Mecca time), the prices of benchmark Brent crude futures – for September delivery – 2023, increased by 0.01%, to record $ 79.64 a barrel.
On the other hand, West Texas Intermediate crude – for August 2023 delivery – decreased by 0.18%, to record $ 75.61 per barrel, according to figures monitored by the specialized energy platform.
And oil prices ended their dealings yesterday, Tuesday, July 18, with an increase of more than 2%, amid concerns about demand and expectations of a decline in US oil production during next August.
Oil price analysis
“There are many positive drivers for oil prices right now on the supply and demand front, as we expect WTI to rebound to around $80 a barrel,” said CMC Markets analyst Leon Lee.
He added, “This does not indicate a bull market, because the pessimistic attitude of global central banks still represents a decline in risk appetite,” according to Reuters.
He explained that with the Federal Reserve likely to raise interest rates for the last time in July, concerns about US demand are likely to continue, which will limit gains in oil prices.
demand for oil
Economists remain concerned that inflation in the US may not fall fast enough even with interest rates raised.
A Reuters poll showed that core inflation, which excludes food and energy prices, will be only slightly lower or will remain near the current level of just under 5% by the end of the year.
However, on a positive note, China’s chief economic planner pledged on Tuesday that he would implement policies to “restore and expand” consumption in the world’s second-largest economy, which could boost demand for oil as consumers’ purchasing power remained weak.
“For now, as long as we assume that stimulus in China will be successful, oil stocks will shrink significantly … even if Europe falls into a mild recession,” said Claudio Gallimberti, director of North America research at Rystad Energy.
He added that this means that oil prices may still breach the upper end of the current market range at $80 a barrel, Reuters reported.
oil supplies
On the supply side, Russia will reduce its oil exports by 2.1 million metric tons in the third quarter, in line with the planned voluntary cuts in exports of 500,000 barrels per day in August, according to the Energy Ministry.
Support for oil prices came – also – from the expected decline in US stocks, after data from the American Petroleum Institute showed a decline in crude oil, gasoline and distillate inventories last week.
Traders will watch for confirmation of a drawdown in the data from the US government’s Energy Information Administration today, Wednesday, at 02:30 PM GMT (05:30 PM Mecca).
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