Globally oil prices climb on expectations of lower OPEC exports in August. On Monday, higher oil prices could be seen as global supply tightened with lower exports from oil petroleum exporting countries, offsetting nagging concerns about global demand growth amid high interest rates.
As per Stefano Grasso, a senior portfolio manager at 8VantEdge in Singapore, citing preliminary data from shiptracking firm Kpler, supply is tightening, however, with OPEC+ oil exports is set to fall for a second time in August.
“Overall supply is going down, demand is going up,” Grasso said. “Unless there is a recession and demand slows or drops, OPEC+ is in control.”
China’s shift with economic concerns
As oil prices climb above $80 a barrel due to supply cuts by OPEC+ oil exporters, including Russia, China has opted to utilize its record inventories accumulated earlier this year. This has led Chinese refiners to cut back on new purchases. Additionally, amidst China’s deepening property crisis and potential sluggish economic growth, concerns about sustained oil demand growth have arisen. However, to capitalize on strong export margins, Chinese refiners have amplified their refined product exports in July.
In July, Saudi Arabia one of the oil petroleum exporting countries shipments to China fell 31% from June while Russia, with its discounted crude, remained the Asian giant’s largest supplier, Chinese customs data showed.
Decreasing U.S. oil output
A drop in the number of operating oil rigs in U.S., the number of operating oil rigs is also one more reason for higher oil prices. According to Baker Hughes’ recent report, an early indicator of future output, fell by five to 520 last week, marking their lowest count since March 2022. This comes alongside concerns about a persistent robust U.S. dollar, given speculations that interest rates might remain elevated for an extended period.
Short-term outlook with oil prices climbing
The prevailing scenario of oil prices climbing reflects a bullish short-term outlook for oil. With global OPEC exports reducing and demand surging, unless an unforeseen economic downturn occurs, it seems OPEC+ oil companies hold the reins. The next movements, especially concerning interest rates and global economic health, will be critical for the oil market’s trajectory.
Stock analysis
Brent crude climbed 75 cents to $85.55 a barrel by 0301 GMT, while U.S. West Texas Intermediate crude was at $82.05 a barrel, up 80 cents. The September WTI contract expires on Tuesday and the more active October contract gained 73 cents to $81.39 a barrel.
Both front-month benchmark prices snapped a 7-week winning streak last week to post a weekly loss of about 2% after the U.S. dollar strengthened on the possibility that interest rates could remain higher for longer, with China’s worsening property crisis adding to concerns about its sluggish economic growth and oil demand.
