Crude Oil Prices Surge on Tight Supply and Growing Demand in the US and China
Crude oil prices experienced a significant surge on Monday, resulting in the oil futures contract recording its largest monthly gain in over a year. This increase is primarily attributed to signs of supply constraints and growing demand in the United States and China.
Several factors contributed to the uptick in oil prices, including rising expectations of an end to interest rate hikes in the US and hopes that Saudi Arabia will continue reducing its output throughout September. Additionally, a note from Goldman Sachs suggesting that demand for oil has not yet peaked further supported the market.
On Monday, West Texas Intermediate Crude oil futures for September closed at $81.80 per barrel, marking a gain of $1.22 or approximately 1.5%. Throughout the month of July, WTI crude futures experienced a substantial increase of about 16%. Similarly, Brent crude futures settled at $85.56 per barrel, gaining $0.57 or around 0.7%.
According to a recent Reuter survey, the Organization of the Petroleum Exporting Countries (OPEC) has produced 27.34 million barrels per day in July, which is 840,000 barrels per day lower than the previous month. This marks the lowest production level since September 2021.
Oil market experts remain optimistic about the demand prospects for crude, highlighting the impressive outlook and the ongoing commitment of OPEC+ to maintain a tight market. Edward Moya, Senior Market Analyst at OANDA, stated, The crude demand outlook is getting a boost on soft landing hopes for the US and Europe, adding that the energy market is still awaiting massive stimulus from China that should boost global growth prospects.
Notably, the continuous increase in crude oil prices is expected to have a profound impact on various sectors and industries, including transportation, energy production, and manufacturing. The rising costs of oil can influence consumer prices and potentially impact economic growth.
In conclusion, the surge in crude oil prices can be attributed to tight supply conditions and growing demand in the United States and China. Market optimism regarding the end of US rate hikes, Saudi Arabia’s output reduction plan, and Goldman Sachs’ note on unpeaked demand further contributed to the hikes. However, it’s essential to closely monitor future developments in the global oil market as they unfold.
