Oil rises on prospects of a full rebound in Asian demand 

For the first time in three days, crude oil futures faced gains. It followed Saudi Aramco’s statement about a strong demand recovery of oil in Asia. 

WTI crude increased by 1.8%, to $41.96 per barrel at intraday highs. Brent crude gained 1.3% to trade at $44.98.

Amin Nasser, CEO of Saudi Aramco, stated on Sunday that he saw oil demand returning to pre-pandemic highs in Asia. Economies are reopening in Asian countries and activity resumes. 

Oil demand has struggled to recover in summer globally. A new wave of coronavirus infections has restrained travel activity and paused full reopenings.

Iraq’s cut in supply boosted oil 

On the other hand, Iraq’s reduction in the black gold supply supported the oil price rally. The country promised last week that it would cut the production by another 400,000 barrels per day. 

According to the joint statement of Iraq’s oil minister and Saudi Arabia’s energy minister, Iraq’s production cut was in addition to the 850,000 barrels per day. Iraq committed to decreasing its supply in August and September under the supply pact of OPEC and its allies. The total production cut will amount to 1.25 million BPD for each month.

Abdul Jabbar, Iraq’s oil minister, confirmed Iraq’s strong commitment to the OPEC+ agreement. He added that Iraq would reach 100% compliance by the beginning of August.

In July, OPEC oil production increased by 1 million barrels per day. Saudi Arabia and other Gulf members of the group ended their voluntary extra cuts. Also, other members made insufficient progress on compliance.

Analysts expect a strong upward trend in the commodity prices

As oil prices plummeted during the coronavirus pandemic, OPEC and its allies delivered 5.743 million barrels per day of its share of cuts. It was equal to 94% compliance. 

After the record drop of oil prices in April with WTI contracts sinking below zero, both Brent and WTI crude traded about $40 per barrel over the past few months. 

WTI touched a five-month high on Wednesday, after the report of the US Energy Information Administration about a drop in crude inventories.

According to Craig Erlam, a senior market analyst at OANDA Europe, both benchmarks trade just off previous week’s highs. However, a more positive outlook could boost a strong uptrend through the fall. The analyst also mentioned that last week’s breakout in crude oil prices didn’t gather much momentum. Still, many more assessments like this may change that. Producers are looking to slowly grow production again from August.