Oil rises on expectations of no immediate boost to Saudi production

OIL prices rose on Friday (Jul 15) after a US official told Reuters an immediate Saudi oil output boost is not expected, while indications that the US central bank could raise interest rates less aggressively than anticipated also supported crude.

Brent crude futures for September delivery rose US$2.10 or 2.12%, to US$101.2 a barrel by 1405 GMT while WTI crude rose US$2.18 or 2.28% to US$97.96.

The US Federal Reserve’s most hawkish policymakers on Thursday said they favoured a rate increase of 75 basis points at its policy meeting this month, not the bigger increase traders had priced in after a report on Wednesday showed inflation was accelerating.

Concerns that the Fed might opt for a full 100 bps rate rise this month and weak economic data had led to Brent and WTI shedding more than US$5 on Thursday to below the closing price on Feb 23, the day before Russia invaded Ukraine, though both contracts clawed back nearly all the losses by the end of the session.

US President Joe Biden is set to land in Jeddah later on Friday, and had been expected to call for Saudi Arabia to pump more oil.

But the United States does not expect Saudi Arabia to immediately boost oil production and is eyeing the outcome of the next Opec+ meeting on Aug 3, a US official told Reuters on Friday.

The comment comes at a time when spare capacity at members of the Organization of the Petroleum Exporting Countries (Opec) is running low.

Still, the United States could secure a commitment that Opec will boost production in the months ahead in hopes that it will provide a signal to the market that supplies are coming if necessary.

“[Biden’s] case will have been weakened significantly by the latest price rout,” said Stephen Brennock of oil broker PVM.

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Analysts expect continued pressure on oil from concerns over the global economy.

“Brent has dipped noticeably below US$100 per barrel this week. It is likely to continue sliding given that the recession fears will presumably not abate for the time being,” Commerzbank said in a note.

Bearish market sentiment has also followed renewed Covid-19 outbreaks in China, which have hampered a demand recovery.

China’s refinery throughput in June shrank nearly 10% from a year earlier, with output for the first half of the year down 6% in the first annual decline for the period since at least 2011, data showed on Friday. REUTERS