August 04, 2023 (MLN): Oil prices rose on Friday, heading for a sixth consecutive weekly gain on supply concerns arising from further output cuts by Saudi Arabia and Russia, the world's second and third-largest oil producers.

Brent crude is currently trading at $85.31 per barrel, up by 0.35% on the day.

While West Texas Intermediate crude (WTI) is trading at $81.63 per barrel, up by 0.32% on the day.

To note, both benchmarks, Brent crude and WTI have gained 1.24% and 1.57% respectively in the current week.

Saudi Arabia on Thursday extended a voluntary oil production cut of 1 million barrels per day (bpd) to the end of September, as per a state news agency.

Russia will also slash its oil exports by 300,000 bpd in September, its Deputy Prime Minister Alexander Novak said, as Reuters reported.

The Joint Ministerial Monitoring Committee of OPEC+ is unlikely to tweak its overall oil output cuts at its meeting on Friday, sources have said.

But the extension of Saudi Arabia's reductions and comments by Russia ahead of the OPEC+ meeting have raised supply concerns, supporting prices.

However, the latest batch of U.S. data showing tight labor markets and a slowing service sector has triggered some worries that an economic slowdown would curb demand for oil and pressure prices lower, even with the supply cuts.

"A strong dollar has weighed on crude prices and everyone wants to know if a hot labor market will force the Fed to tighten policy even further," said Edward Moya, an analyst at OANDA, referring to the U.S. Federal Reserve potentially raising interest rates.

The Bank of England (BoE) on Thursday raised its key interest rate by 25bps to 5.25% and warned that borrowing costs were likely to stay high for some time.

Interest rates and oil demand have an inverse relationship, as oil demand falls in an environment of high-interest rates.

However, an improved demand outlook and tighter supply could continue to buoy the oil markets, said Tina Teng, an analyst at CMC Markets.

Market participants are now monitoring the upcoming U.S. Non-farm payrolls (NFP) figures for June that will be released on Friday.

Copyright Mettis Link News

Posted on: 2023-08-04T12:54:20+05:00