July 14, 2024
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Oil Prices Rise amid Supply Concerns, Economic Growth Signs

Oil prices experienced a slight increase on Thursday, driven by concerns over lower supply as major producers continue to uphold output cuts and signs of stronger economic growth in the United States, the world’s largest oil consumer.

According to Reuters, Brent futures for June saw a rise of 4 cents to reach $89.39 per barrel at 0651 GMT. Similarly, U.S. West Texas Intermediate (WTI) futures for May also increased by 2 cents, reaching $85.45 a barrel.

The Organization of Petroleum Exporting Countries and its allies (OPEC+), including Russia, maintained their oil supply policy unchanged during a meeting of top ministers on Wednesday.

Additionally, some countries were urged to enhance compliance with existing output cuts.

Notably, the group announced that certain members would compensate for oversupply in the first quarter, with Russia shifting its focus to output rather than export curbs.

Both the June Brent contract and the May WTI contract have experienced gains over the past four days, closing on Wednesday at their highest levels since the end of October.

Analysts at ING observed that oil prices continued their upward trajectory following the OPEC+ meeting, during which no changes to output policy were recommended.

“Brent is facing some resistance at the US$90/bbl level, with it unable to break above it so far,” the ING analysts said.

Furthermore, Federal Reserve Chair Jerome Powell struck a cautious tone regarding future interest rate cuts due to recent data indicating higher-than-expected job growth and inflation.

These remarks were viewed as positive for oil prices, signaling robust economic growth in the United States.

ANZ analysts noted that while the decision by OPEC+ to maintain existing policies was widely anticipated, it provides assurance that recent tensions in the Middle East have not altered the group’s perspective on the market dynamics.

Recent increases in oil prices have been attributed to Ukrainian attacks on Russian refineries, disrupting fuel supply, and concerns that the conflict between Israel and Hamas in Gaza could escalate to involve Iran, potentially disrupting supplies in the crucial Middle East region.

Iran has vowed retaliation against Israel for an attack earlier in the week that resulted in the deaths of senior Iranian military personnel. Iran, as the third-largest producer in OPEC, holds significant influence over oil markets.

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