Crude Oil Rises 1% Due to Reduced Supplies and Increased Heating Oil Costs


China Utilizes Record Stockpiles Amidst High Prices – Data

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Elevated Heating Oil Costs Drive Up Crude Prices – Analyst

Persisting Concerns about Chinese Economy and US Interest Rates Impacting Market Sentiment

LONDON, August 21 (Reuters) – Oil prices registered an increase of over 1% on Monday, buoyed by reduced supply evident in diminished exports from Saudi Arabia and Russia. The substantial rise in heating oil prices also counteracted worries surrounding global demand growth.

Brent crude climbed by 86 cents, equivalent to 1%, reaching $85.66 per barrel by 1205 GMT. Simultaneously, U.S. West Texas Intermediate crude advanced by $1.01, representing a 1.2% gain at $82.26.

As the September WTI contract reaches its expiry on Tuesday, the more active October contract experienced an uptick of 88 cents, translating to a 1.1% rise, bringing it to $81.54 per barrel.

Both primary benchmark prices, which had enjoyed seven consecutive weeks of gains, encountered a 2% loss last week. The setback was attributed to concerns surrounding China’s sluggish economic growth potentially affecting oil demand. Additionally, the specter of potential increases in U.S. interest rates continues to cast a shadow over the demand outlook.

“We still see a tight oil balance for the remainder of the year, which suggests that prices still have some room to run higher,” commented Warren Patterson, ING’s Head of Commodities Research. He also noted that the dollar’s performance is providing support. A weaker dollar makes oil more affordable for those holding other currencies, potentially boosting demand.

John Evans, an oil broker at PVM, emphasized the bullish impact of high heating oil prices, particularly as the northern hemisphere approaches colder months. However, he underscored the complexity of gauging whether the robust heating oil market alone can drive the broader oil market higher, considering the presence of overarching macroeconomic concerns.

Despite China’s economic challenges, the country is tapping into previously accumulated record inventories from earlier in the year. This strategy comes as refiners curtail purchases after prices surged beyond $80 a barrel due to supply cuts orchestrated by the OPEC+ coalition, comprising OPEC and allied nations such as Russia. Chinese customs data highlighted a 31% decline in Saudi Arabia’s shipments to China in July, while Russia, with its discounted crude, remained the country’s leading supplier.

“Unless there’s a recession and demand slows or drops, OPEC+ is in control,” asserted Stefano Grasso, a Senior Portfolio Manager at 8VantEdge in Singapore.

Naija247news is an investigative news platform that tracks news on Nigerian Economy, Business, Politics, Financial and Africa and Global Economy.

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