Oil prices boosted gains on Monday, supported by a weak dollar and tight supply, which offset recession concerns and the possibility of widespread COVID-19 lockdowns in China to reduce fuel demand again.
Brent crude futures for September delivery rose 69 cents, or 0.7%, to $101.85 a barrel as of 0421 GMT, after gaining 2.1% on Friday.
West Texas Intermediate (WTI) crude futures for August delivery rose 27 cents, or 0.3%, to $97.86 a barrel after climbing 1.9% in the previous session.
Last week, Brent and WTI posted their biggest weekly declines in nearly a month amid fears of a recession that will hit oil demand. Mass COVID testing continued in parts of China this week, raising concerns about oil demand in the world’s second-largest oil consumer.
The tight oil supply supports prices.
Not surprisingly, during Biden’s visit to Saudi Arabia, there has been no commitment against the oil supply increase by the top OPEC producer.
Nevertheless, Biden wants Gulf oil producers to increase production to help lower oil prices and curb inflation. While there is no immediate commitment to increase oil production, it is clear that the US is pointing to an expected gradual increase in supply.
This trip will help oil producers take action in terms of supply, and countries will increase production within their means.
From November onwards, SPR oscillations will decrease and increased supply will help stabilize the market.
The next meeting of the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, on August 3 will be closely watched as existing production deals expire in September.
However, Russia’s counter-attacks, which had a difficult time due to the sanctions, are not very predictable.
Global markets focused this week on the resumption of Russian gas flows to Europe via the Nord Stream 1 pipeline, whose maintenance is scheduled to end on July 21. Countries, markets, and companies fear the lockdown will be extended due to the war in Ukraine.
This loss of gas will hit Germany, the world’s fourth-largest economy, and increase the threat of recession.
Separately, US Treasury Secretary Janet Yellen said on the sidelines of meetings of 20 major economic groups that they had productive meetings with a number of countries about a proposed price cap for Russian oil.
China’s Ministry of Commerce also said last week that Yellen raised the idea of a price cap idea during a virtual meeting with Chinese Vice Premier Liu He on July 5.
The ministry said that setting a cap on the Russian oil price is a complex issue and eventually that a prerequisite for resolving the Ukraine crisis is to encourage peace talks between the parties involved.
