Oil resumed trading above $100 after the Saudis declined to make any promises regarding future output increases. A weaker dollar also helped put wider commodity markets on firmer footing.
West Texas Intermediate added as much as 4.9%, aided by general risk-on sentiment that rallied broader markets. Saudi ministers insisted at the conclusion of President Joe Biden’s visit last week that oil policy decisions would be dictated by market logic and with coalition agreement. Iraq’s oil minister told Bloomberg he sees oil trading above $100 for the rest of the year.
The rally this morning is more about a weaker US Dollar and higher equity markets, said Dennis Kissler, senior vice president of trading at BOK Financial. “Saudi Arabia gave no signs of immediate production increases coming, which sums up to last week’s selloff probably being overexaggerated.”
Crude has slumped since mid-June as concerns about a potential recession ripped through commodity markets, eroding gains that followed Russia’s invasion of Ukraine. Nonetheless, Biden remains eager to get the Organization of Petroleum Exporting Countries to add supplies to bring prices down further and help quell inflation.
“We continue to expect a further tightening of the oil market, warranting higher oil prices,” UBS analysts including Giovanni Staunovo wrote in a note. “Following the meeting between the US and Saudi leaders over the weekend, we learned that OPEC+ will only open the taps if the market conditions warrant it.”
OPEC and its allies next meet on Aug. 3 after members agreed to revive the crude supplies that were halted during the coronavirus pandemic.
Prices:
- WTI for August delivery rose $4.24 to $101.83 a barrel at 10:59 a.m. in New York.
- Brent for September settlement increased $4.55 to $105.71 a barrel.
Investors also focused on the return of crude shipments from Libya. 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.
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