Crude oil prices rise slightly in early trade

3 Aug 2023 , 09:43 AM

Early on Thursday, in Asian trading, oil prices increased marginally as traders assessed the impact of Fitch’s downgrade of the U.S. government’s top credit against positive inventory data released by the US on Wednesday and the potential extension of OPEC+ output curbs.

U.S. West Texas Intermediate crude increased 29 cents, or 0.36%, to $79.78 a barrel and Brent crude futures increased 27 cents, or 0.32%, to $83.47 a barrel.

On Wednesday, both indexes were trading close to their best levels since April, but they ended the day down 2% due to the risk-off investor mood brought on by the rating downgrade.

The ratings agency Fitch downgraded the United States’ long-term foreign currency ratings on Tuesday from AAA to AA+ in light of the anticipated fiscal decline over the following three years, as well as worries about the weighty and rising general government debt burden, political polarization, and the status of the U.S. dollar abroad.

On Wednesday, as fear reverberated across the financial markets, Wall Street’s three primary indexes closed lower and Treasury yields increased.

Despite the general negative mood, a backdrop of tightening supply continues to boost prices.

According to the Energy Information Administration, U.S. crude stocks dropped by a record 17 million barrels last week as refiners increased production and exports reached 5 million barrels per day (bpd).

The inventory decrease, which far above analysts’ predictions in a Reuters poll of 1.4 million barrels, indicated that the world’s supply was not keeping up with demand as big producers continued to make significant cuts.

The Organization of the Petroleum Exporting Countries and Allies, also known as OPEC+, will hold its subsequent market monitoring committee meeting on August 4th.

According to Reuters, OPEC+ is unlikely to change its present policy regarding oil output, with Saudi Arabia poised to extend its voluntary 1 million bpd cut for an additional month to cover September.

Lower shipments from western Russian ports in the first week of August suggest that Moscow is now enforcing its supply cut commitments. Russia previously declared plans to reduce exports by 500,000 bpd in August.

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