The oil prices fell on Monday, even though a week ago, Saudi Arabia and Russia had announced new production cuts, driving prices to a ten-week high.
Oil prices drop despite Saudi Arabia and Russia’s maintenance of cuts. Saudi Arabia and Russia announced last week that they would extend voluntary cuts of a combined total of 1.3 million barrels per day (bpd) until the end of the year. The price of Brent (the benchmark for Angolan sales) dropped 23 cents, or 0.25 percent, to $90.42 per barrel in the middle of yesterday’s London market session, while the U.S. West Texas Intermediate (WTI) lost 46 cents or 0.53 percentage points, trading at $87.05.
The supply cuts overshadowed ongoing concerns about Chinese economic activity last week, but investors seemed to be focused on reports about demand that are due to be released this week by the International Energy Agency (IEA) and the Organization of the Petroleum Exporting Countries (OPEC).
Last month, the IEA lowered its forecast for oil demand growth in 2024 to one million bpd, citing weak macroeconomic conditions as the cause. Meanwhile, OPEC’s August report maintained its demand growth forecast at 2.25 million bpd.
Among the economic factors influencing crude oil prices, the European Central Bank (ECB) is expected to announce its monthly interest rate decision this week.
In addition, the Eurozone is projected to grow more slowly than previously expected in 2023 and 2024, as stated yesterday by the European Commission, citing the slowdown in the German economy. It now projects a GDP growth of 0.8 percent this year for the five largest economies in the area, down from the 1.1 percentage points forecasted in May.
Meanwhile, in the United States, August Consumer Price Index (CPI) data will be released tomorrow and may provide clues about further interest rate hikes.
“The key economic number for the United States this week is the inflation data, which is likely to influence everything from stocks to currencies, fixed income, and commodity prices,” said Naeem Aslam, an analyst at Capital Markets, as cited by Reuters.
Saudis signal Asians with full supplies
Saudi Aramco has informed at least five North Asian buyers that it will provide contractual volumes of crude oil in October, sources familiar with the matter said yesterday, as reported by Reuters, despite the extended voluntary production cuts promised by the Kingdom.
The world’s largest oil exporter announced last week that it would extend the unilateral cut of one million barrels per day (bpd) until the end of the year, pushing Brent prices above $90 per barrel for the first time this year.
However, Saudi Aramco raised the selling price of its crude oil, Arab Light, for October by 10 cents less than in September.
Chinese refineries have maintained demand for the total volumes indicated for October at a level similar to September, at around 50 million barrels, said three trade sources.
“Despite the modest price increase, Saudi oil remains more expensive than others. But as refineries are bound by the forward contract, they cannot always ask for a lower offer,” said a source from the British agency.
