Oil Prices Stable as Major Producers Maintain Supply Cuts
LONDON, Sept 4 (Reuters) – Oil prices remained stable on Monday as expectations grew that major producers would continue to keep supplies tight. These hopes were fueled by the anticipation of the Federal Reserve leaving interest rates unchanged in order to avoid dampening the U.S. economy.
Brent crude futures for November saw a slight increase of 5 cents, reaching $88.60 a barrel by 1110 GMT. Meanwhile, U.S. West Texas Intermediate crude (WTI) October futures rose 2 cents to $85.57 a barrel.
This comes after both contracts reached their highest levels in over six months last week, following two weeks of losses.
According to Sugandha Sachdeva, executive vice president and chief strategist at Acme Investment Advisors, “Crude oil prices have been primarily driven by the anticipation of additional supply cuts from major oil-producing nations, Russia and Saudi Arabia.” However, Sachdeva also noted that the continuous increase in U.S. oil production may limit further significant gains in price.
In October, Saudi Arabia is expected to maintain a voluntary 1-million-barrel per day (bpd) cut, following previous announcements. These voluntary cut extensions typically come ahead of the country’s official selling prices, which are usually released in the first week of the month.
Russia, on the other hand, has already announced export cuts of 300,000 bpd for September, following a 500,000-bpd cut in August. Russian Deputy Prime Minister Alexander Novak stated that Russia has agreed with OPEC partners on the parameters for continued export cuts.
An official announcement detailing the planned cuts from both Russia and Saudi Arabia is expected later this week.
CEO of Vitol, Russell Hardy, mentioned that the global crude market should ease in the next six to eight weeks due to refinery maintenance. However, supplies of sour crude with higher sulphur content to complex refineries in India, Kuwait, Jizan (Saudi Arabia), Oman, and China are expected to remain tight due to OPEC+ cuts.
In the United States, job growth gained momentum in August, but the unemployment rate climbed to 3.8% and wage gains moderated. This suggests a cooling labor market and further solidifies the expectation that the Federal Reserve will not raise interest rates this month in order to avoid further dampening the economy.
Meanwhile, manufacturing activity in China unexpectedly expanded in August, according to a PMI survey. This has curbed some of the pessimism about the economic health of the world’s largest oil importer, which has been affected by the struggling property sector since the emergence of the COVID-19 pandemic.
Last week, Beijing implemented economic support measures, including deposit rate cuts at some of the largest state-owned banks and an easing of home buyer borrowing rules. These measures have provided investors with some positivity.
Reporting by Paul Carsten in London and Mohi Narayan in New Delhi; Additional reporting by Yousef Saba in Dubai and Andrew Hayley in Beijing; editing by Simon Clarence Fernandez and Jason Neely