Oil prices rose again on July 19 as a result of tighter US crude supplies and lower Russian oil exports along with expectations that the US Federal Reserve will stop raising interest rates soon. Meanwhile, China’s top economic planner pledged earlier this week to roll out policies to “restore and expand” consumption in the world’s second-largest economy, which could boost oil demand.
Brent futures were up 66 cents at $80.29 a barrel while US West Texas Intermediate (WTI) crude was up 46 cents at $76.21. Back home, on the Multi Commodity Exchange (MCX), crude oil futures due for a July 19 expiry, were last trading higher by 0.29 per cent at ₹6,1239 per bbl, having swung between ₹6,188 and ₹6,351 per bbl during the session so far, compared to their previous close of ₹6,221 per bbl.
What’s driving crude oil prices?
-US crude inventories fell by 708,000 barrels in the last week to 457.4 million barrels, Energy Information Administration data showed on Wednesday. For the first time since January 2021, the data showed inventories in the Strategic Petroleum Reserve climbed, as the US tries to refill the reserve following last year’s record drawdown.
-US data on Tuesday showing retail sales rose below expectations in June boosted expectations that the Federal Reserve will stop raising interest rates. Higher interest rates increase borrowing costs and can slow economic growth and reduce oil demand.
-In another positive sign, European Central Bank (ECB) governing council member Klaas Knot on Tuesday suggested that rate hikes beyond next week’s meeting were “by no means a certainty”. Meanwhile, the latest inflation data out of Canada and the United Kingdom that show signs of cooling have also lifted sentiment.
-Russia is set to reduce its oil exports by 2.1 million metric tons in the third quarter, in line with planned voluntary export cuts of 500,000 barrels per day in August, according to the country’s energy ministry
-Russian Urals oil jumped above the $60 per barrel Western price cap last week, but dropped slightly below the cap earlier this week on weaker Brent.
“It’s an end of an era,” said Phil Flynn, an analyst at Price Futures Group. “We’re reminded the SPR releases have come to an end, and the market is going to be on much more solid footing.”
In another positive sign, European Central Bank (ECB) governing council member Klaas Knot on Tuesday suggested that rate hikes beyond its meeting next week were “by no means a certainty.”
“Traders have started to become a lot more optimistic as inflation eases off … any improvement in the inflation data also means an improvement in oil demand,” said Naeem Aslam of Zaye Capital Markets.
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Updated: 19 Jul 2023, 10:41 PM IST