Crude oil prices continue to rise due to anticipated supply cuts

11 Jul 2023 , 11:09 AM

Tuesday saw a slight increase in oil prices as traders focused on production reductions by the world’s two largest oil exporters, Saudi Arabia and Russia, and awaited data that could assist determine demand.

Brent crude futures had increased by 33 cents, or 0.4%, to $78 per barrel, while U.S. West Texas Intermediate crude had increased by 35 cents, or 0.5%, to $73.36.

Prices decreased 1% on Monday as a result of heightened expectations for future U.S. interest rate increases and profit-taking by investors following last week’s 4.5% increase.

While central bank officials stated that the U.S. Federal Reserve will probably need to raise interest rates even further in order to reduce inflation, markets took solace in signs that the authorities also believed the current cycle of tightening monetary policy was nearing its conclusion.

The major oil exporters in the world, Saudi Arabia and Russia have agreed to supply restrictions in August. This has helped to raise benchmark prices, which were also boosted by the U.S. dollar’s two-month low. A declining dollar lowers the cost of crude for owners of foreign currencies and frequently increases demand for oil.

Last week, Saudi Arabia said that it will prolong its 1 million barrels per day (bpd) cut at least through August, while Russia announced that it would reduce its oil shipments by 500,000 bpd the next month.

Traders were also anticipating data on U.S. crude inventories that industry association American Petroleum Institute is expected to release later on Tuesday. Analysts predict that 200,000 barrels will be added. 

In order to assess the future for demand, investors also anticipated the release later this week of data from the U.S. Consumer Price Index, a crucial inflation measure, and economic reports from China.

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