Rally Price of Oil Drops Amid Supply Cut Pledges

A marginal demand decline following an extended period of price surges caused oil drops. Still, the market’s momentum remains bolstered by significant commitments from major oil producers Saudi Arabia and Russia, both pledging to prolong supply cuts until September.

Brent and WTI Continue to Display Resilience

Last week marked the sixth consecutive week of gains for both global benchmarks, providing a testament to the sustained strength of the oil market.

Brief Dip in Prices Amid Profit-Booking

Monday witnessed a slight retreat in oil prices, with Brent crude futures slipping by 63 cents to reach $85.61 per barrel by 1217 GMT. Meanwhile, U.S. West Texas Intermediate crude registered a decline of 65 cents, resting at $82.17 per barrel. During an earlier session, WTI experienced a more significant dip of $1.

Expert Insights on Market Dynamics

Naeem Aslam, Chief Investment Officer at Zaye Capital Markets, explained the temporary profit-booking trend among traders. He emphasized that the ongoing voluntary supply cuts, extended by major oil-producing nations, create a favourable environment for a market deficit, which is likely to continue driving oil prices upward.

Saudi Arabia and Russia’s Pledge for Production Cuts

Saudi Arabia, the world’s leading oil exporter, announced an extension of its voluntary production cut of 1 million barrels per day (bpd) until the end of September. The possibility of further extensions was also highlighted. In alignment with these production cuts, Saudi Aramco elevated the official selling prices for several grade exports to Asia for the third consecutive month in September.

Russia’s Contribution to Supply Tightening

Russia joined the efforts to tighten supply with its decision to reduce oil exports by 300,000 bpd in September. This cumulative impact of production cuts and the anticipation of substantial depletion in oil inventories over the coming months generate an encouraging fundamental backdrop, as articulated by PVM analyst Tamas Varga.

Global Economic and Political Factors

In addition to supply dynamics, global economic and political factors shape the oil market’s trajectory. Notably, despite a recent U.S. rating downgrade, the underlying global macroeconomic conditions remain positive. Market attention is also directed towards Chinese economic data as an indicator of potential stimulus measures.

Monitoring US Consumer Price Reading and Geopolitical Tensions

Investors are closely watching the upcoming U.S. consumer price reading. The event will take place on Thursday, which could provide insights into the Federal Reserve’s monetary policy. Geopolitical tensions, exemplified by the Russia-Ukraine situation in Black Sea ports, remain a variable with the potential to impact oil rig.

Oil Prices Amidst Geopolitical Uncertainty

Geopolitical factors continue to influence oil prices, evident in the recent attack on Russia’s key oil export hub and the subsequent pledges for supply cuts by Saudi Arabia and Russia. The market’s vigilance remains heightened as it navigates these variables and their potential effects on oil supply and demand.

Brent and WTI Display Resilience Amidst Uncertainty

Despite the temporary decline in prices, global benchmark Brent futures maintain strength, hovering at $86.17 per barrel, a level last seen on April 14. Similarly, U.S. West Texas Intermediate futures display resilience, settling at $82.74 per barrel, in close proximity to mid-April highs. The oil market’s ability to hold firm in the face of multifaceted challenges underscores its robustness.

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