Tightening global supply in the wake of lower exports from Russia and Saudi Arabia supported a rise in crude oil prices Monday, shrugging off concerns about sluggish global demand.
Brent crude for October settlement rose 0.6% to $85.31 a barrel as of 9:45 am GST Monday, while West Texas Intermediate (WTI) crude for September contracts gained 0.7% to $81.78 per barrel around the same time.
With OPEC+ crude exports set to fall a second month in August, crude supply is tightening, Stefano Grasso, a senior portfolio manager at 8VantEdge in Singapore, told Reuters, citing preliminary data from ship-tracking firm Kpler.
Last week, both benchmarks—Brent and WTI—declined 2.8% and 2.3% to $84.80 and $81.25 per barrel, respectively, after a continuous rally for the previous seven weeks, according to Investing.com.
Mounting concerns that the US Federal Reserve has not finished raising rates to tame inflation and weak market sentiment on China’s sluggish economic data have adversely affected the market sentiment last week. According to the latest Fed meeting minutes, the central bank officials remain divided on further rate hikes.
Moreover, China’s economic data for July indicated less-than-expected growth in retail sales, industrial output, and investment during July, prompting fears that the economic slowdown could last over a prolonged period.
However, according to analysts, OPEC’s production cuts, coupled with rising demand in the wake of increased travel and better industrial activity in the US, has aided the upward movement, a Reuters report said last week.
The global crude oil demand is peaking to record highs, supported by strong summer air travel, increased power generation needs, and hectic activity in the petrochemical industry in China, the International Energy Agency (IEA) said in its latest report last month.
The global energy agency on August 11 said demand is set to grow by 2.2 million barrels per day (bpd) worldwide, reaching 102.2 million bpd in 2023, with China contributing more than 70% of the rise. Demand from China was stronger than expected, touching new highs despite concerns over the overall economic growth.
Crude demand growth is expected to slow to 1 million bpd next year, with the post-pandemic recovery having largely run its course and as the energy transition gathers pace, the IEA report showed.
This is against OPEC+’s expected global demand growth of 2.25 million bpd in 2024, compared to the 2.44 million bpd rise in 2023.
