Oil prices steady after recent highs

At 1148 am, the November contract of Brent on the Intercontinental Exchange (ICE) was at $88.57 per barrel, up 0.02% from its previous close. The October contract of West Texas Intermediate (WTI) on NYMEX was at $85.61 a barrel, an increase of 0.07% from previous close.      

In the previous session, Brent touched $88.9 per barrel, the highest in nine months.

According to agency reports, Russia has announced that it will extend export curbs, while Saudi Arabia is widely expected to follow suit by pushing its voluntary curbs into October.

In a note, Kotak Securities on Monday said that crude oil prices witnessed over 7% upside last week, biggest since March, as Russia signaled that it would extend export curbs and bets that Saudi Arabia will extend in October its voluntary monthly production cut of one million barrels per day introduced in July.

Ravindra Rao, head of commodity research at Kotak Securities said, “WTI Crude oil futures surged more than 7% during the previous week and closed at $85.55 per barrel, as signs of tightening physical markets and continued efforts by Chinese authorities lifted the sentiments.”

The price of India oil crude basket rose 7.54% in August, reaching $86.43 a barrel. Analysts believe that despite recessionary concerns, output cuts, stimulus measures in China, and hopes of improved winter demand may keep the prices elevated.

Positive macroeconomic data in the US and China also supported prices. In the US, job growth gained momentum last month although unemployment rate increased to 3.8%. In China, manufacturing activity expanded in August, according to data from Caixin’s manufacturing PMI. An improvement in economic activity in China gains significance as it the second largest importer of oil in the world.

Last week, Chinese authorities announced measures to support the economy including deposit rate cuts and an easing of borrowing norms for home buyers. These measures are expected to boost the growth of Chinese economy.

“Unexpected expansion in China Caixin Manufacturing PMI coupled with Beijing slashing the reserve requirement ratio further aided prices as the support measures starts to gain traction. Prospects of Fed pivot might also underpin the demand outlook and keep the prices buoyed,” Rao of Kotak Securities said.

Updated: 04 Sep 2023, 01:18 PM IST