Oil prices showed little change on Tuesday as traders considered the impact of supply cuts by major oil exporters and the potential for increased demand in the developing world for the latter half of 2023. Brent crude futures saw a minimal increase of 2 cents, reaching $77.71 per barrel by 0945 GMT, while U.S. West Texas Intermediate crude rose by 5 cents to $73.04.
The benchmark prices received a boost from supply reductions scheduled for August by leading exporters Saudi Arabia and Russia. Additionally, the price of crude was supported by a weakening U.S. dollar, which hit a two-month low. When the dollar weakens, it makes crude more affordable for holders of other currencies, often leading to increased demand for oil.
Edward Moya, an analyst at OANDA, stated, “Oil has found a floor and the only thing that could break that is if U.S. inflation is scorching hot and the Fed is forced to tighten this economy into a recession.”
The market is eagerly awaiting U.S. inflation data on Wednesday in order to gauge whether price pressures are continuing to ease, which will provide insights into the interest rate outlook. While central bank officials have indicated that the U.S. Federal Reserve is likely to raise interest rates in order to curb inflation, the markets have been somewhat reassured by signals that the period of monetary policy tightening may soon come to an end.
However, there is still some prevailing anxiety regarding the potential for recession fears to result in downgrades in oil demand. Tamas Varga, an analyst at PVM, stated, “Nevertheless, nerves are not completely calmed just yet. Anxiety is still palpable that recession fears could lead to downgrades in oil demand.”
Despite the concern over a sluggish global economy, the head of the International Energy Agency (IEA) affirmed on Monday that the organization is confident in their expectation of strong oil demand from China and developing countries. The IEA believes that, coupled with the recently announced supply cuts, this demand will keep the market tight for the second half of the year.
In summary, oil prices remained relatively steady as traders weighed the effects of supply cuts and prospects for increased demand. The market was supported by a weaker dollar and the anticipation of easing inflationary pressures. While concerns over a potential economic downturn persist, the IEA remains optimistic about oil demand in the developing world.
Source link
