Oil prices saw minimal movement on Thursday as the market responded to tighter crude supply and concerns of a global economic slowdown. Brent crude futures increased by 29 cents, reaching $76.94 per barrel by 0838 GMT, following a 0.5 percent rise the previous day. U.S. West Texas Intermediate crude also saw gains, rising by 37 cents to reach $72.16 per barrel, after experiencing a 2.9 percent increase in post-holiday trade on Wednesday to catch up with Brent’s earlier week’s gains.
Saudi Arabia and Russia, two top oil exporters, recently announced additional output cuts for August, further tightening the supply of crude. These cuts bring the total reduction to over 5 million barrels per day (bpd), which accounts for approximately 5 percent of global oil output. Additionally, a larger-than-expected drop in U.S. crude stocks has contributed to some support for prices.
Notably, the Fed minutes released on the previous night suggested that both the oil balance and financial conditions will likely tighten. PVM analyst Tamas Varga stated, “Persistent recession worries will probably encumber, but not prevent, oil from marching higher.”
Furthermore, concerns about a potential global recession have been amplified by recent surveys indicating a slowdown in factory and services activity in China and Europe. Analysts believe that there will be further increases in interest rates in the U.S. and Europe to combat persistently high inflation. However, the minutes from the June meeting of the U.S. central bank revealed a unanimous decision to maintain steady interest rates in order to assess the necessity for future policy tightening, despite most attendees anticipating the need for further hikes.
In conclusion, oil prices experienced limited fluctuations as the market absorbed tighter supply conditions and apprehensions surrounding a global economic slowdown. The announcement of output cuts by Saudi Arabia and Russia, combined with a larger-than-expected drop in U.S. crude stocks, offered some support to prices. Nevertheless, concerns about a potential recession and the need for future interest rate hikes persisted, influencing the trajectory of oil prices in the coming days.