February 29, 2024

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Oil prices are rising as tight supplies compete with economic concerns

Oil prices are rising as tight supplies compete with economic concerns

SINGAPORE (Reuters) – Oil prices rose slightly on Monday as bullish sentiment about shrinking supplies from OPEC+ cuts and resumption of U.S. buying of reserves outweighed concerns about fuel demand in the world’s two largest oil consumers, the United States and China.

Brent crude futures rose 39 cents, or 0.5 percent, to $74.56 a barrel by 1120 GMT, while US West Texas Intermediate crude was $70.45 a barrel, up 41 cents, or 0.6 percent.

Last week, both benchmarks fell for the fourth week in a row, the longest streak of weekly declines since September 2022, due to fears that the United States might enter a recession amid the risk of a default occurring historically at the beginning of June.

“With an uneven reopening in China and concerns that the US is facing slowing growth at a time when the X date for the debt ceiling is fast approaching, fueled by a rally in the US dollar, market sentiment is fueled by crude oil,” said Tony Sycamore, an analyst at IG.

However, global crude supplies may contract in the second half as the Organization of the Petroleum Exporting Countries (OPEC+) and its allies, including Russia, make additional production cuts that reduce volumes of sour crude.

The group announced in April that some members would cut production again by about 1.16 million bpd, bringing the total size of the cuts to 3.66 million bpd, according to Reuters calculations.

But Iraqi Oil Minister Hayan Abdul Ghani said Iraq does not expect OPEC+ to make further oil production cuts at its next meeting on June 4.

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Meanwhile, industry sources said on Monday that the flows of crude oil in northern Iraq to the Turkish port of Ceyhan have not yet resumed after Baghdad requested to restart them last week, which helps maintain global supply scarcity.

Energy Secretary Jennifer Granholm told lawmakers on Thursday that the United States could begin buying back oil for the Strategic Petroleum Reserve (SPR) after completing a sale approved by Congress in June.

Meanwhile, leaders of the Group of Seven (G7) nations may announce new measures at their May 19-21 meetings aimed at evading sanctions involving third countries, officials with direct knowledge of the discussions said.

People said that tougher sanctions would also seek to undermine Russia’s energy production in the future and curb trade that supports the Russian military.

(Reporting by Florence Tan) Editing by Muralikumar Anantharaman

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