Oil Prices Surge to 2-Month High: Supply Cuts and US Labor Market Easing Boost Market Confidence

2023-07-07 21:50:00
Closing price: Oil prices climbed to their highest level in two months on Friday, as the slight easing in the US labor market shed fears that the US central bank could overdo it on rate hikes to the point of stalling the economy. But lingering concerns about weakening demand are slowing its rise with announcements of supply cuts from Russia and Saudi Arabia.

The barrel of Brent BRENT Brent or North Sea crude is a variation of crude oil serving as a benchmark in Europe, listed on the InterContinentalExchange (ICE), a stock exchange specializing in energy trading. It has become the first international standard for setting oil prices. North Sea for September delivery climbed 2.54% to $78.47.

Its American equivalent, the barrel of West Texas Intermediate (WTI WTI West Texas Intermediate (WTI), also known as Texas Light Sweet, is a variation of crude oil that serves as a standard in pricing crude oil and as a commodity for oil futures contracts with the Nymex (New York Mercantile Exchange). ), the stock market specializing in energy.) for August delivery, gained 2.86% to $73.86.

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“This suggests that the US Federal Reserve (Fed) may not keep interest rates high for as long as expected, which alleviates the impact this could have on energy demand,” Andy commented. Lipow of Lipow Oil Associates.

But the oil market also remains concerned about persistent supply cuts, which is driving prices up.

“Prices have risen lately in response to Saudi Arabia’s extension of production cuts while Russian exports have fallen,” Lipow said.

On Monday, Saudi Arabia and Russia, two major crude-producing countries, announced cuts in their supply.

“This comes at the same time as a continued decline in US oil inventories,” said the analyst, as commercial crude reserves in the United States fell by 1.5 million barrels last week after – 9.6 million barrels the week before.

Faced with what appears to be a shortfall in supply, many economic indicators are simultaneously fueling persistent fears of weakening demand.

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“In the other two major (oil) demanding regions, the United States and Western Europe, the still high levels of inflation force the Fed and the ECB (European Central Bank) to raise key interest rates even further. , despite the massive increases already made,” said Carsten Fritsch of Commerzbank.

These increases should have “an impact on economic development”, he continues, indicating that economists at Commerzbank expect the United States and the euro zone to enter recession in the second half of the year.