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Oil Rises on Supply Concerns and Weaker Dollar
After the Saudis refused to commit to any future supply increases, oil prices rose above $100. A weaker dollar also helped stabilize global commodity markets.
On Monday, West Texas Intermediate increased 5.1 percent to close above $102 per barrel. Following President Joe Biden’s visit last week, Saudi ministers insisted that choices regarding oil policy will be made in accordance with coalition agreement and market logic. According to Bloomberg, Iraq’s oil minister expects oil to trade above $100 for the remainder of the year.
According to Dennis Kissler, senior vice president of trading at BOK Financial, the weaker US Dollar and rising equity markets are largely responsible for this week’s starting bounce. Saudi Arabia made no indications that output will increase right away, which means that last week’s selloff was probably overblown.
Since mid-June, crude has fallen as fears of a looming recession have ravaged commodity markets, wiping out gains made in the wake of Russia’s invasion of Ukraine. However, Biden is still eager to persuade the Organization of Petroleum Exporting Countries to increase supplies in order to further drive down prices and combat inflation.
After members decided to resume the crude shipments that were stopped during the coronavirus outbreak, OPEC and its partners will next meet on August 3. RBC analysts predict that Saudi Arabia and a few other producers would likely increase supply by a small amount again.
Helima Croft, chief commodities analyst at RBC Capital Markets, predicted that the monarchy would “create a mechanism to compensate for the members that have routinely failed to fulfill their monthly production quotas” in a report.
Prices:
- WTI for August delivery rose $5.01 to settle at $102.60 a barrel in New York.
- Brent for September settlement increased $5.11 to settle at $106.27 a barrel.
Elsewhere, Libya was in the process of restarting crude shipments. Prime Minister Abdul Hamid Dbeibah said the country’s exports are on track for a full resumption after months of outages as he justified his replacement of the leadership at state-run oil National Oil Corp.
South Africa’s largest fuel producer declared force majeure on the supply of petroleum products due to delays in crude deliveries to the Natref refinery it jointly owns.