Crude oil closed higher on Tuesday August 8th after spending much of the trading session in the red. Prices were supported by an upward revision in the United States Department of Energy’s (DoE) projection for Brent crude oil prices.
Production cuts by Saudi Arabia and Russia also seem to be having the intended effect of boosting prices by limiting supply, according to analysts.
On the New York Mercantile Exchange (Nymex), September WTI crude oil closed up by 1.19% ($0.98), at $82.92 per barrel.
This marked the highest closing level for the most actively traded WTI contract since April 12th, when it reached $83.26. Brent crude oil for October, traded on the Intercontinental Exchange (ICE), closed up by 0.97% ($0.83), at $86.17 per barrel.
Oil prices began to rise after the DoE increased its projection for Brent crude oil prices in the second half of 2023, from $79 to $86.
Edward Moya, an analyst at Oanda, commented that the market appears to be much tighter, and economic prospects are somewhat better as central bank tightening cycles approach their end. “Clearly, the cuts by Saudi Arabia and Russia are working, along with those implemented by the Organization of the Petroleum Exporting Countries and allies (OPEC+) last year,” he stated.
TD Securities also noted that energy supply risks are “reaching levels not seen since the start of the war in Ukraine.” The cuts should “keep the crude oil markets on a trajectory of pronounced tightening,” added the Canadian bank.
Contracts remained mostly in negative territory for much of the day, following the release of China’s trade balance figures, which showed a decline in imports and a steep drop in exports for the world’s largest consumer of commodities.
Oil prices initially fell by 2% as the market digested the trade balance data and due to the strengthening of the dollar.
However, despite weakness in Chinese oil imports, Capital Economics believes that the “increase in international aviation to and from China will support domestic oil demand this year.”
