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Crude oil prices saw a slight decline in Monday’s trading, but bulls continued to defend the crucial $90 per barrel mark for the global oil benchmark, Brent. This resilience is based on the anticipation of further reductions in U.S. stockpiles for the fifth consecutive week.
Brent and WTI Performance
Brent crude, based in London, settled at $90.64, showing a minimal one-cent drop from Friday’s close. Over the past two weeks, it has surged by more than 7%, adding momentum to a rally that began in June and pushing its year-to-date gain to almost 6%. Meanwhile, West Texas Intermediate (WTI), traded in New York, settled at $87.29 per barrel, marking a 0.3% increase of 22 cents. This performance reinstates the oil rally that started in June, propelling the U.S. crude benchmark up by 9% for the year.
Saudi-Russian Production Cuts Boost in Oil Prices
Oil prices have been on an upward trajectory in recent weeks, driven in part by the Saudi-Russian decision to extend output restrictions until year-end. Brent crude is currently trading around the $90 mark, where it has held steady for the past week.
Factors Influencing Prices This Week
This week, the oil market will closely monitor several significant events. The U.S. Energy Information Administration (EIA) is set to report on Wednesday, with expectations of a fifth consecutive weekly decline in domestic crude and gasoline stockpiles. Favorable weather ahead of the approaching fall season has encouraged continued road travel in the U.S.
Additionally, the Vienna-based Organization of the Petroleum Exporting Countries (OPEC) and the Paris-based International Energy Agency (IEA) will release supply-demand forecasts, with OPEC’s report receiving particular scrutiny for insights into potential supply tightness that could push prices higher. However, the IEA may highlight the risk of higher inflation, which could dampen demand.
Inflation Data Impact
On Wednesday, the U.S. will release its August Consumer Price Index (CPI), expected to show a year-on-year increase of 3.6%. Rising energy prices have been a significant driver of inflation. If the CPI continues to climb, it could prompt the Federal Reserve to consider more rate hikes than initially expected by economists.
Saudi Arabia’s Ambition
As Brent crude holds above $90, Saudi Arabia’s ambition to reach $100 a barrel or beyond becomes increasingly evident. The kingdom has been implementing additional production cuts of 1.0 million barrels per day since July, alongside existing production rationing. With plans to extend these cuts until the year-end, and with Moscow’s support for a 300,000-barrel-per-day reduction in Russian production, Saudi Arabia aims to reshape the oil market’s dynamics.
With less than two weeks remaining in the summer season, when Americans typically drive the most, the usual fall retreat in crude prices may not occur this year, as Saudi Arabia remains steadfast in its goal to achieve triple-digit oil prices.
Disclaimer: This article serves solely for informational purposes and should not be construed as financial advice. Thus, we strongly advise readers to conduct thorough research. In addition to, consult with financial professionals before making any investment decisions.
