Oil Reaches New Peaks as Tighter Supply Offsets China's Demand Concerns
- 09-Aug-2023 7:10 PM
- Journalist: Nicholas Seifield
Oil prices surged to fresh highs on Wednesday, with Brent crude reaching its highest level since April. This significant price increase was driven by supply constraints resulting from output cuts by major producers such as Saudi Arabia and Russia. These production curbs managed to counterbalance worries over sluggish demand from China, compounded by a report revealing an uptick in U.S. crude inventories.
In a bid to maintain market stability, Saudi Arabia, the top global exporter, recently extended its voluntary production cut of 1 million barrels per day for an additional month, encompassing September. Meanwhile, Russia announced its intention to slash oil exports by 300,000 bpd in the coming September.
Brent crude witnessed an increase of 54 cents, equivalent to a 0.6% rise, reaching $86.71 by 1110 GMT. It peaked at $87.09, marking its highest point since April 13. Similarly, U.S. WTI crude experienced a gain of 51 cents, or 0.6%, reaching $83.43. The U.S. benchmark soared to $83.91, a level unseen since November 2022.
The oil market has maintained its upward momentum, posting its sixth consecutive weekly gain. This growth was facilitated by reduced OPEC+ supplies and optimistic expectations of stimulus measures bolstering oil demand recovery in China.
On Tuesday, Saudi Arabia's cabinet expressed its unwavering support for the precautionary measures adopted by the Organization of the Petroleum Exporting Countries and its allies (OPEC+) to stabilize the market, according to state media reports.
While the market exhibited strength, bearish pressure emerged from Tuesday's data released by the American Petroleum Institute (API). The figures indicated a 4.1-million-barrel increase in U.S. crude stocks over the past week. However, gasoline and distillate inventories recorded declines.
China's data released on Tuesday contributed to the market pressure on oil prices. The figures revealed an 18.8% month-on-month drop in crude oil imports for July, marking the lowest daily rate since January. Nevertheless, these imports demonstrated a 17% year-on-year increase.
About Brent Crude: Brent Crude stands as a prominent global oil benchmark, exerting influence over more than two-thirds of the world's oil contracts. This benchmark centers on oil extracted from oil and gas fields located in the North Sea within North-West Europe. Distinguished by its lower density and reduced sulfur content, Brent Crude is classified as both sweet and light. Today, it encompasses all constituents of the Brent complex, forming the foundation for a robust financial and physically traded oil market centered around the North Sea. Primarily, the term "Brent crude" pertains to the pricing of the Brent Crude Futures contract, actively traded on the Intercontinental Exchange (ICE). Presently, Brent has risen to prominence as the preeminent global benchmark for oil prices, dictating the trajectory of nearly 80% of transactions within the spot oil market.
