Expectations of tighter supply and stronger Chinese demand take precedence over concerns about an economic slowdown
Oil prices rose 1% on Thursday, offsetting losses from the previous session, as expectations of tighter supplies and stronger Chinese demand overcame concerns about the economic slowdown.
Brent crude futures rose 72 cents, or 0.9%, to 83.64 barrels at 0522 GMT, while West Texas Intermediate (WTI) crude rose 78 cents, or 1%, to $79.56 from April 19. moving towards its highest level.
Oil prices slumped Wednesday after data showed US crude inventories fell less than expected and the Federal Reserve raised interest rates by a quarter point, leaving the door open for another hike.
As the Fed’s move is expected, the market’s focus is turning to the Organization of the Petroleum Exporting Countries, called OPEC+, and its allies, and they will hold their monthly committee meeting next week.
The committee’s outlook on demand will play a key role in whether de facto leader Saudi Arabia will decide to extend the 1 million bpd voluntary production cut through September.
Saudi Arabia cut its production from around 10 million barrels a day to 9 million barrels a day in July, the biggest production drop in years and said early July it would extend the cut into August.
Meanwhile, market sentiment remains buoyant as China promised to take more steps to support growth earlier this week.
Chinese officials have signaled increased support measures to stimulate the Chinese economy, which raises hopes for a revival in oil demand from the world’s largest importer of crude oil.
With the Fed’s pivot approach and crude oil demand somewhat resilient at a time of insufficient supply in the second half of the year, $80 per barrel for WTI can be said to be the technical psychological level.
Brent oil futures are also expected to rise to $85 a barrel in the fourth quarter amid OPEC+ supply cuts and expectations that flexible demand will force global oil inventories to decline.
But the European Central Bank, which has limited oil gains, is expected to raise interest rates for the ninth consecutive year on Thursday, and that may not be the end of policy tightening amid persistent inflation.
According to three industry sources, Russia will significantly increase oil shipments in September. It will launch more crude for overseas sales, as opposed to what resulted from refinery maintenance peaks and sharp export cuts between June and August.
