Due to major oil-producing countries such as Saudi Arabia and Russia pledging to continue restricting crude oil supply for one more month, expectations of tight oil supply in recent months have remained high, leading to a strong rise in international oil prices since the end of June. Both major international benchmark crude oils, Brent and West Texas Intermediate, have neared their highest levels since mid-April.
Last Thursday, Saudi Arabia, the world's largest oil exporter, announced it would continue voluntarily cutting production by 1 million barrels per day and is considering extending or deepening this production limit after the end of September. Such restriction measures have significant impacts on the global crude oil market and energy sector because Saudi Arabia is one of the world's most important oil-producing countries, and its production cut decisions will have severe effects on global oil supply and international oil prices. Additionally, another major oil-producing country, Russia, announced last Thursday that it would cut its oil exports by 300,000 barrels per day in September.
Last week, these two crude oil futures contracts rose for six consecutive weeks, placing the oil market in an upward price trend that has lasted longer than past surges.
Over the past six months, Opec+ has been artificially restricting crude oil production to alleviate the oil glut problem triggered by a gloomy economic outlook. However, with the Federal Reserve's aggressive interest rate hikes since 2022 nearing an end, particularly as the market expects China's economic activity to gradually recover in the second half of the year, oil demand might expand again.
Analysts at ANZ Bank reported that the market is closely monitoring whether Saudi Arabia will further deepen production cuts and the impact on the global oil market. Currently, tight oil supply and declining inventories are gradually improving the oil market's supply-demand balance, making the key indicators of the physical oil market strong in recent weeks.
In a move echoing production cuts, Saudi Aramco decided to raise the official selling price of most crude oil varieties sold to Asia in September. Furthermore, Baker Hughes's drilling report last Friday showed that the number of operating oil wells in the US fell to 525 last week, marking the eighth consecutive week of decline and the lowest level since March 2022.
Investors will closely monitor this week's Chinese economic data to assess the health and growth momentum of China's economy, as well as to anticipate whether the Chinese government will implement more stimulus measures to support economic development.
