Global Crude Oil Prices Rebound as Supply Cut Takes Effect, Uncertainties Loom

The recent supply cut of Crude Oil rebounded the prices globally after witnessing a wide range of fluctuations in the previous weeks. An announcement to cut down the supply of Crude Oil effective from July 1 by Saudi Arabia and Russia disrupted the market dynamics, which had worked in their favor. Anticipated fear of further price rises eventually led the demand for Crude Oil to take a sharp turn in the global market.

As per the recent assessment, Crude Oil prices surged by 8.3% from July 1 to settle at 75.02 WTI USD per barrel (USA) during the second week of July, while Brent Crude was up to 7.7% at USD 79.56 a barrel. The rise in Crude Oil prices was supported by expectations of a tightening of US Crude supplies as the US Crude Oil inventories fell by 2.3 million barrels in the second week of July amid higher-than-expected demand. The decline in US crude inventories is likely due to a combination of factors, including lower production from shale oil producers and increased demand from refiners. As per the Energy Information Administration, Shale oil production is estimated to decline by 9.40 million barrels per day in August, which could further hamper the supply chain of Crude Oil. Moreover, Saudi Arabia would likely extend a production cut by 1 million bpd in August along with a 500,000 bpd cut by Russian exporters, which could disrupt the supply further.

In addition to the decline in US crude inventories, Crude Oil prices were also supported by supply disruptions in major producers Libya and Nigeria. Libya's oil production has been disrupted by political unrest, while Nigeria's oil production has been affected by sabotage. These supply disruptions have helped to tighten the global oil market. Meanwhile, refiners are increasing their output to meet the growing demand for gasoline and diesel.

However, China's slower economic growth could question the surged prices. As per the NBS data, the GDP growth rate of China slowed to 6.3% year-on-year in the second quarter, lower than forecasted by key economists. This raised concerns about the country's demand for Crude Oil, which could negatively affect the price trend.

As per ChemAnalyst, the Crude Oil market is bullish, and prices will likely remain supported by tight supply conditions. However, the outlook for oil prices in the upcoming months is uncertain. The oil market is constantly evolving, and it is difficult to predict with certainty how prices will behave in the future.