ISLAMABAD: Crude oil prices surged over one percent on Thursday as traders refocused their attention on signs of supply tightness, brushing aside the latest rate hikes by the US Federal Reserves and the European Central Bank by 25 basis points each. As of 1220 hours GMT, Brent, the international benchmark for two-thirds of the world’s oil, gained $0.77 (+0.93 percent) to reach $83.65 a barrel. The West Texas Intermediate (WTI), the main oil benchmark for North America, went up by $0.82 (+1.04 percent) to $79.60 a barrel. The price of Russian Sokol inched down by $0.04 (-0.05 percent) to $74.58. Arab Light prices witnessed a dip of $0.05 (-0.06 percent) to reach $86.73 a barrel. On the other hand, the price for Opec Basket decreased by $1.45 (+1.74 percent) to $84.64. TLTP
The OPEC Reference Basket of Crudes (ORB) is made up of Saharan Blend, Girassol, Djeno, Zafiro, Rabi Light, Iran Heavy, Basra Light, Kuwait Export, Es Sider, Bonny Light, Arab Light, Murban and Merey.
The European Central Bank on Thursday announced that it raised key rates by 25 basis points (bps) following the July policy meeting. Earlier on Wednesday, the Federal Reserve announced another rate hike of a quarter of a percentage point, signaling there may be more hikes down the road. The prices fell a day earlier after the Energy Information Administration reported modest draws in crude oil and fuel inventories.
All this has been bearish for oil but it appears that traders are beginning to hear the warnings of tight supply as well. They expect Saudi Arabia to extend its voluntary production cuts beyond August if prices don’t rise more substantially.
The fundamentals are increasingly pointing to a tighter oil market this summer. Russia is preparing to cut 500,000 barrels per day (bpd) off its oil exports in August, and shipping plans so far suggest that Russia could deliver on at least part of its pledge to reduce oil exports next month.
Saudi Arabia’s crude oil exports have also started to decline, to below 7 million bpd in May, for the first time in many months. Crude shipments out of the world’s top exporter could further decline as Saudi Arabia is now cutting its production by 1 million bpd in July and August.
