Oil prices surged on Monday as a result of a tightening global supply stemming from reduced exports by key oil producers like Saudi Arabia and Russia.
These constraints in supply managed to overshadow concerns about a potential decline in global demand due to elevated interest rates.
Brent crude at $85.55 and WTI at $82.05 per barrel
The price of Brent crude advanced by 75 cents, attaining a level of $85.55 per barrel by 4 a.m., while U.S. West Texas Intermediate (WTI) crude gained 80 cents, reaching $82.05 per barrel.
As the September WTI contract’s expiration was impending, the more active October contract also saw an increase of 73 cents, culminating at $81.39 per barrel.
Although the primary benchmark prices experienced a 2 percent weekly loss last week, breaking a seven-week streak of gains, this downtrend was primarily attributed to the strengthening U.S. dollar, heightening concerns about prolonged higher interest rates.
The ongoing property crisis in China, along with its potential repercussions on economic growth and oil demand, also played a role in the recent price decline.
According to Stefano Grasso, a senior portfolio manager at 8VantEdge in Singapore, the global supply situation is anticipated to tighten further, with OPEC+ crude exports predicted to decrease for a second consecutive month in August.
Grasso emphasized that the combination of diminishing supply and increasing demand would continue to favor OPEC+’s control over the market unless an economic recession triggers a drop in demand.
China, the world’s largest importer of crude oil, responded to supply cuts enforced by OPEC and its allied producers (OPEC+) earlier this year by tapping into its record oil inventories.
This decision led to a substantial reduction in Saudi Arabia’s shipments to China, which plummeted by 31 percent in July compared to June.
However, Russia, recognized for its discounted crude, maintained its position as China’s primary oil supplier. Concurrently, Chinese refiners bolstered their exports of refined products in July due to favorable export margins.
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