Crude Oil Prices Rise Slightly in Early Asian Trade
Crude oil prices experienced a slight increase in early Asian trade on Thursday, following significant losses the previous day. As of press time, it rose 0.17% to $83.34, while Brent crude rose 0.19% to $79.62. However, both contracts fell nearly 2% for the week, despite five consecutive weeks of strong gains.
During the US session on Wednesday, the recovery of the US dollar offset the optimism surrounding inventory data, which showed a sharp decrease in US crude oil inventories over the past week. Traders decided to take some profits out of the market due to increased risk aversion after international rating agency Fitch downgraded the US sovereign rating. Prior to Wednesday’s downturn, oil prices had been trading at three-month highs.
It is important to note that the US dollar experienced a significant rise this week, as data showed that the US economy remained resilient despite Fitch’s downgrade. The dollar was particularly strengthened by stronger-than-expected private payrolls data on Wednesday, indicating a strengthening labor market ahead of Friday’s key non-farm payrolls data.
On the other hand, the stronger dollar weighed on most dollar-denominated commodities, as the resilient US economy increased speculation that the Federal Reserve will continue to raise interest rates.
Optimism about tighter supplies has been offset by concerns about rate hikes. US crude inventories decreased by more than 17 million barrels in the week to July 28, surpassing expectations for a draw of 1.4 million barrels. This was also the largest drop in crude inventories since records began in 1982, suggesting a significant tightening in the crude market after major suppliers cut production this year.
Market focus is now on the upcoming OPEC meeting on Friday. Saudi Arabia, the de facto leader of OPEC, is expected to extend its decision to cut output by 1 million bpd until September. The production cuts by Saudi Arabia and Russia have been the main drivers behind the increase in oil prices, as global supplies are set to tighten throughout the rest of the year. These cuts were made to offset the expected drop in oil demand, according to the group.
Tighter oil supplies are anticipated to boost prices this year, leading Goldman Sachs to recently raise its oil price forecast based on this outlook.
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(Translation: Li Shanwen)