Oil prices climbed on Monday, driven by tightening global supply coming from reduced exports by major producers like Saudi Arabia and Russia, which outweighed concerns about slowing global demand due to high-interest rates.
Brent crude rose by 75 cents, reaching $85.55 a barrel as of 4 a.m., while U.S. West Texas Intermediate (WTI) crude climbed 80 cents to $82.05 a barrel.
The September WTI contract expires on Tuesday, and the more active October contract also gained 73 cents, settling at $81.39 a barrel.
Both front-month benchmark prices put a pause on a seven-week winning streak last week, experiencing a weekly loss of approximately 2 percent. This was prompted by the strengthening U.S. dollar, which raised the possibility of prolonged higher interest rates.
Concerns over China’s ongoing property crisis and its impact on economic growth and oil demand also contributed to the decline.
Reuters, who spoke to Stefano Grasso, a senior portfolio manager at 8VantEdge in Singapore, said that he expects the global supply situation to tighten, with OPEC+ crude exports expected to decline for a second consecutive month in August.
Citing preliminary data from shiptracking firm Kpler, Grasso said, “Overall supply is going down, demand is going up,” adding that unless a recession occurs and demand drops, OPEC+ remains in control.
China, the world’s largest crude importer, has been tapping into its record inventories amassed earlier this year, following its decision to reduce purchases due to supply cuts imposed by OPEC and its allies, including Russia (OPEC+). These production cuts pushed global prices above $80 a barrel.
Data from Chinese customs showed that in July, Saudi Arabia’s shipments to China dropped by 31 percent compared to June, while Russia, known for its discounted crude, continued to be China’s largest supplier.
Meanwhile, Chinese refiners increased exports of refined products in July due to favourable export margins.