Both global benchmarks Brent and WTI surged to 10-month highs last week after Saudi Arabia and Russia said they would extend supply cuts of a combined 1.3 million barrels per day to the end of the year. As part of their voluntary cuts, the kingdom is extending its one million bpd output reduction until December, while Russia is rolling over its export cut of 300,000 bpd until the end of the year.
The International Energy Agency expects demand to expand by a record 2.2 million bpd this year, supported by a recovery in China’s economy. However, the Asian country’s post-coronavirus economic recovery has lost momentum mainly due to a deepening property slump and weak consumer spending.
China has announced a string of stimulus measures over the past few weeks, including halving the stamp duty on stock transactions and easing mortgage rates. The country’s overall exports fell 8.8 percent year on year in August while imports recorded a 7.3 percent drop, customs data showed on Thursday.
On the other hand, US crude stocks, an indicator of fuel demand, fell by 6.3 million barrels in the week that ended on September 1, according to the US Energy Information Administration. Petroleum inventories decreased by 2.7 million barrels last week while distillate stocks rose by 700,000 barrels, the EIA data showed.
Meanwhile, a strong dollar has been weighing on oil futures. The US Dollar Index, a measure of its value against a weighted basket of major currencies, jumped to a six-month high of 105.03 on Wednesday on positive US services sector data. It is currently down 0.17 percent at 104.88. A stronger greenback makes dollar-denominated oil more expensive for holders of other currencies.
On the local front, the caretaker government on September 1 jacked up the petrol and diesel prices by Rs14.91 and Rs18.44 per litre, respectively, to Rs305.36 and Rs311.84. Reports said the petrol price could be increased by Rs9.70 per litre and diesel price by Rs11 per litre for the next fortnight as oil prices in the international market went up after Saudi Arabia announced a cut in production. If the government announces an increase in the petroleum prices as reported, the new petrol price would be Rs315.06 while diesel price would be Rs322.84/litre. An official announcement will be made by the government on September 15 night.
