Oil prices experienced a slight uptick due to ongoing conflicts in the Middle East and rising economic activity in the world’s largest oil-consuming nations, the US and China. These factors have heightened expectations for increased oil demand. However, the prospect of Saudi Arabia boosting its oil production in December has tempered further price increases.
As of 10:40 a.m. local time (0740 GMT), the international benchmark Brent crude rose by 0.02% to $71.95 per barrel, up from the previous close of $71.93. Meanwhile, the US benchmark West Texas Intermediate (WTI) declined by 0.16% to $68.32 per barrel, down from $68.43 in the last session.
Analysts are closely watching upcoming employment data for indications of the US Federal Reserve’s next moves and broader economic trends. Recent lower-than-expected inflation data has bolstered expectations that the Fed may prioritize labor market support, potentially leading to further interest rate cuts.
The likelihood of the Fed cutting rates by 75 basis points by year-end remains strong, with a 54% chance of a 50 basis point cut in November. Such cuts are anticipated to stimulate economic activity and boost oil demand.
In China, government measures aimed at enhancing economic mobility are expected to positively impact oil consumption. Recent economic incentives, including plans for banks to lower mortgage interest rates to address challenges in the housing sector, have been well-received in the markets.
Conversely, expectations that Saudi Arabia, the largest producer within OPEC, will increase output in December to regain market share are capping price gains. In June, the OPEC+ coalition, which includes major producers like Russia, agreed to extend voluntary production cuts of 2.2 million barrels per day until September, with a gradual phase-out planned until September 2025.
However, Saudi Arabia’s strategy seems to be shifting toward increasing supply, as output from non-OPEC producers and weaker global demand pose challenges to the group’s efforts to sustain higher prices.
