Oil prices turned higher during trading today, Monday, July 24 (2023), as a shortage of supplies overshadowed fears of an economic recession.
Traders expect further rate hikes from US and European central banks, but tight supplies and hopes for Chinese stimulus have supported Brent above $80 a barrel.
Markets are assessing the prospects for economic stimulus in China after weak economic data and a decline in oil inventories and the number of rigs in the United States, with supply cuts from major producers led by Saudi Arabia.
Oil prices today
By 10:59 am GMT (01:59 pm Mecca time), the prices of benchmark Brent crude futures – for September delivery 2023 – increased by 0.56% ($ 0.45), to reach $ 81.52 a barrel.
West Texas Intermediate crude – for September delivery 2023 – increased by 0.58%, to record $ 77.52 a barrel, according to figures monitored by the specialized energy platform.
And oil prices ended their dealings, on Friday, July 21, with an increase of about 2%, to achieve weekly gains, amid hopes for a recovery in demand.
Oil price analysis
The two benchmarks (Brent and West Texas) rose 1.5% and 2.2%, respectively, last week, which is the fourth consecutive week of gains.
Supply is expected to contract after the OPEC+ cuts, and political tensions escalated in Ukraine after Russia withdrew from the UN-brokered Safe Sea Corridor agreement for the export of grain.
City Research said in a note that the rise in oil prices reflects “tightening conditions with the impact of Saudi oil production cuts on the market … and somewhat increased summer demand for gasoline and jet fuel.”
It added that it saw some rise in oil prices over the summer and expected an average price in the third quarter of $83 per barrel.
“While another Fed rate hike this week could lead to some short-term oil price volatility, we expect tightening market conditions on OPEC supply cuts and increased market speculation of further stimulus in China to continue pushing prices higher through the third quarter of 2023,” analysts from the National Australian Bank said in a note.
Oil price forecast
CMC Markets analyst Leon Lee said he expects WTI oil prices to eventually reach $80 again on a “seasonal demand pickup,” Reuters reported.
Investors have priced in quarter-point gains from the Federal Reserve and European Central Bank this week; So the focus will be on what Federal Reserve Chairman Jerome Powell and European Central Bank President Christine Lagarde have to say about raising interest rates in the future.
The rise in interest rates weakened investments and increased the price of the dollar. This made dollar-denominated commodities more expensive for holders of other currencies.
demand for oil
Market participants also expect Beijing to implement targeted stimulus measures to support its ailing economy; This is likely to boost demand for oil in the world’s second largest consumer of crude.
China’s state planner on Monday unveiled measures to promote, encourage and stimulate private investment in some infrastructure sectors, and said it will boost financial support for private enterprises.
On supplies, UAE Energy Minister Suhail Al Mazrouei said on Friday that OPEC+ measures to support the oil market are sufficient for the time being, and that the coalition is ready if any further steps are needed.
For its part, energy services company Baker Hughes said, on Friday, that US energy companies conducted, last week, the deepest cuts to oil platforms since early June, with operating units decreasing by 7 to 530 rigs.
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