Oil prices climbed for a second consecutive day on Friday, poised for their sixth consecutive week of gains, following the commitment from Saudi Arabia and Russia, the world’s second and third-largest crude producers, to reduce output through the next month.
As of 0609 GMT, Brent crude futures for October inched up by 2 cents to reach $85.16 a barrel, while U.S. West Texas Intermediate crude for September increased by 9 cents, or 0.1%, reaching $81.64.
This latest surge marks the longest streak of weekly gains for both benchmarks this year, with Brent rising by 15.4% and WTI by 18.2% over the last six weeks.
The surge in oil prices was triggered by Saudi Arabia’s decision on Thursday to extend its voluntary oil production cut of 1 million barrels per day (bpd) until the end of September. Russia also pledged to reduce its oil exports by 300,000 bpd during September, as confirmed by Deputy Prime Minister Alexander Novak.
The Joint Ministerial Monitoring Committee of OPEC+ is anticipated to maintain its existing oil output cuts during its meeting on Friday, according to sources. However, the extension of Saudi Arabia’s production cuts and Russia’s commitment have raised concerns about potential supply constraints, lending further support to the rising prices.
Despite these bullish factors, some concerns have been raised due to recent U.S. data indicating tight labor markets and a slowdown in the service sector. Market watchers worry that an economic slowdown could dampen oil demand and exert downward pressure on prices, despite the supply cuts.
The strength of the U.S. dollar has also weighed on crude prices, and analysts are keeping an eye on whether a strong labor market will lead the U.S. Federal Reserve to tighten its monetary policy by potentially raising interest rates.
Moreover, the downturn in euro zone business activity, worse than initially anticipated in July, and the Bank of England’s decision to raise its interest rate to a 15-year high on Thursday may impact economic growth and reduce oil demand due to higher borrowing costs for businesses and consumers.
However, some analysts remain optimistic about the oil markets, citing an improved demand outlook and tighter supply as factors that could continue to support prices. Tina Teng, an analyst at CMC Markets, highlighted that the upcoming U.S. non-farm payroll data will be closely watched as it could influence market sentiment.
As the global oil market navigates through these supply and demand dynamics, traders and policymakers will closely monitor economic indicators and production decisions from major oil-producing countries to gauge the future direction of oil prices.
