Oil prices experienced a notable surge on the 24th of July, with Brent crude rallying above $80 per barrel due to tightening supply conditions and optimism surrounding potential stimulus measures in China.
Brent crude futures registered a gain of 91 cents, representing a 1.1% increase, reaching $81.98 per barrel.
US West Texas Intermediate (WTI) crude saw a rise of $1.05, or 1.3%, bringing it to $78.12 a barrel.
This upward momentum comes as the markets anticipate further rate hikes from the US and European central banks.
Despite these expectations, Brent and WTI benchmarks recorded a 1.5% and 2.2% gain during the previous week, marking their fourth consecutive week of increases, mainly attributed to the expected tightening of supply following OPEC cuts.
Beyond supply constraints, geopolitical tensions also played a role in influencing oil prices.
The escalation of conflict in Ukraine after Russia’s withdrawal from a UN-brokered safe sea corridor agreement for grain exports added to the market uncertainties.
Analysts from Citi Research noted that the rise in oil prices reflects the impact of Saudi oil output cuts on the market, coupled with increased summer demand for gasoline and jet fuel.
Citi Research predicted a potential upside for oil during the summer months, projecting an average price of $83 a barrel in the third quarter.
Market participants are closely watching the Federal Reserve and European Central Bank this week, as they have already priced in expected quarter-point rate hikes.
The focus now lies on statements from Fed Chair Jerome Powell and ECB President Christine Lagarde, which could shed light on future rate increases.
Such measures are anticipated to bolster China’s economy and increase oil demand in the world’s second-largest consumer.
The confluence of tightening supply conditions, geopolitical tensions, and prospects of Chinese economic stimulus has propelled oil prices upward, and market speculators foresee continued price growth throughout the third quarter of 2023.