Oil prices remained constant on Monday as optimism grew that the Federal Reserve would maintain interest rates in order to prevent slowing the U.S. economy. Major producers were expected to keep supplies tight.
By 0648 GMT, the November Brent crude futures contract was trading 3 cents down at $88.52 per barrel. West Texas Intermediate (WTI) crude for the United States was trading at $85.55 per barrel in October.
Following two weeks of losses, both contracts closed last week at their highest levels in more than six months.
According to Sugandha Sachdeva, executive vice president and chief strategist at Acme Investment Advisors, “the expectation of more supply cuts from major oil-producing nations, Russia and Saudi Arabia, has been the main driver of crude oil prices.
However, Sachdeva cautioned that further major price increases might be constrained by the steadily rising U.S. oil production.
Alexander Novak, deputy prime minister of Russia, said on Thursday that the country and its OPEC allies had reached an agreement on the guidelines for ongoing export restrictions.
This week, a formal announcement outlining the proposed cuts is anticipated.
Following a 500,000-bpd reduction in August, Russia has already announced that it will reduce exports by 300,000 barrels per day (bpd) in September. Additionally, a voluntary drop of 1 million bpd is anticipated from Saudi Arabia into October.
At the APPEC summit on Monday in Singapore,
Because of refinery maintenance, according to Vitol’s chief executive Russell Hardy, the world’s crude market could loosen up in the following six to eight weeks, but the supply of sour oil, which has a higher sulphur content, will remain scarce.
According to Hardy, “There isn’t enough supply (of sour crude) for all these sophisticated refineries in India, Kuwait, Jizan, Oman, and China because of the OPEC+ reduction.
Job growth accelerated in the United States in August, but the unemployment rate increased to 3.8%, and wage increases slowed. These indicators point to a cooling of labour market conditions, and they reinforce expectations that the Federal Reserve will refrain from further slowing the economy by raising interest rates this month.
According to Caixin’s manufacturing PMI survey statistics, manufacturing activity in China unexpectedly increased in August, easing concerns over the health of the world’s largest oil importer’s economy.
Prices have also been bolstered by Beijing’s economic stimulus measures from the previous week, including as reductions in deposit rates at some of the biggest state-owned banks and looser lending restrictions for homebuyers.
Investors are still waiting for more significant action to support the troubled real estate market, which has been a major drag on China’s economy ever since the COVID-19 outbreak.
(Editing by Simon Cameron-Moore and Clarence Fernandez; reporting by Mohi Narayan in New Delhi and additional reporting by Andrew Hayley in Beijing)