MELBOURNE: Oil prices climbed yesterday, supported by Saudi optimism about Asian demand and an Iraqi pledge to deepen supply cuts, although uncertainty over a deal to shore up the US economic recovery capped gains.
Brent crude futures rose 34 US cents, or 0.8%, to US$44.74 a barrel, while US West Texas Intermediate (WTI) crude futures were up 47 US cents, or 1.1%, to US$41.69 a barrel.
Both benchmark contracts fell on Friday, hurt by demand concerns, but Brent still ended the week up 2.5%, with WTI up 2.4%.
“Comments from the weekend from Aramco are the driver at the moment,” said Michael McCarthy, market strategist at CMC Markets and Stockbroking.
Saudi Arabian Aramco’s chief executive Amin Nasser said on Sunday he saw oil demand rebounding in Asia as economies gradually opened up after the easing of coronavirus lockdowns.
“He painted a rosy picture on the outlook for demand in the Asian region,” McCarthy said.
On the supply side, Iraq said on Friday it would cut its oil output by a further 400,000 barrels per day (bpd) in August and September to compensate for its overproduction in the past three months.
The move would help it comply with its share of cuts by the Organisation of the Petroleum Exporting Countries and their allies, together called Opec+.
The sharper cut will take Iraq’s total reduction to 1.25 million bpd this month and next.
“Saudi Arabia and Iraq forging better relationships over the oil deal are excellent for the compliance outlook,” AxiCorp market strategist Stephen Innes said in a note.
The Saudi and Iraqi energy ministers said in a joint statement that Opec+ efforts would improve the stability of global oil markets, accelerate its balancing and send positive signals to the markets.
While hopes grew on stalled talks between US Democrats and the White House on a new support package for cash-strapped US states hit by the coronavirus pandemic, delays in reaching a deal weighed on the market.
US House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin both said they were willing to restart talks on a deal to cover the rest of 2020.
“The longer this drags on the worse it is for the demand scenario,” McCarthy said.
He said there was strong technical resistance for WTI around US$42.50 and between US$45 and US$45.50 for Brent.
Holidays in Japan and Singapore yesterday dampened market activity in Asia. — Reuters
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