Oil prices rose on Monday, supported by expectations that major producers will keep supplies tight and hopes the Fed won’t change rates to avoid a negative impact on the US economy.
Brent crude futures for November futures rose 3 cents to $88.58 a barrel at 03:33 GMT. West Texas Intermediate crude (WTI) October futures contracts rose 9 cents to $85.64 a barrel.
The slight gains in Asian trade came after both contracts ended last week at their highest levels in more than six months, after weakening in the previous two weeks.
The contribution to crude oil prices was mainly driven by OPEC+ supply constraints and expectations of additional supply cuts, particularly from Russia and Saudi Arabia. However, the steady increase in US oil production could limit a further increase in price.
Russia has reached an agreement with its partners in the Organization of Petroleum Exporting Countries (OPEC) on parameters for continued export cuts, Russian Deputy Prime Minister Alexander Novak said on Thursday. An official announcement detailing the planned cuts is expected this week.
Russia has already announced that it will cut exports by 300,000 barrels per day (bpd) in September, after cutting 500,000 bpd in August. Saudi Arabia is also expected to voluntarily extend the 1 million bpd cut into October.
The global crude oil supply market may ease in the next six to eight weeks due to refinery maintenance, but the supply of higher sulfur-containing sour crude oil is likely to remain tight. Due to the OPEC+ cuts, there is not enough sour crude supply for all refineries in India, Kuwait, Jizan, Oman, and China.
US employment growth gained momentum in August, but the unemployment rate rose to 3.8% and wage growth slowed; This strengthened expectations that labor market conditions are cooling and that the Federal Reserve will not further damage the economy by raising interest rates.
The data showed that manufacturing activity in China unexpectedly expanded in August, somewhat dampening pessimism about the economic health of the world’s largest oil importer.
A series of economic support measures announced by Beijing last week, such as lowering deposit rates at some of the country’s largest state banks and easing borrowing rules for home buyers, also supported prices.
However, investors continue to wait for more important moves to support the country’s struggling real estate sector, which has been one of the biggest obstacles to the Chinese economy since its exit from the pandemic.