SINGAPORE: Oil prices rose on Tuesday after Saudi Arabia said producer club OPEC and Russia should restrict supplies to current levels, while Washington’s withdrawal of a tariff threat against Mexico removed a cloud over the global economy.
However, traders said concerns about the health of the global economy and the impact on fuel demand were still weighing on oil market sentiment. Front-month Brent crude futures were at $63.61 at 0645 GMT, $0.32, or 0.5%, above Friday’s close. US West Texas Intermediate (WTI) crude futures were at $54.32 per barrel, up $0.33, or 0.6%.
Traders said crude prices were rising following statements by OPEC’s biggest producer Saudi Arabia on Friday that the group was close to agreeing on extending supply cuts.
“Brent futures continue rising … after the Saudi Arabian energy minister expressed confidence that OPEC+ producers will prolong their output cuts programme through the second half of 2019,” said Han Tan, analyst at futures brokerage FXTM.
The Organisation of the Petroleum Exporting Countries (OPEC) and some non-members, including Russia, known collectively as OPEC+, have withheld supplies since the start of the year to prop up prices.
Stephen Innes, managing partner at Vanguard Markets, said stronger stock markets also supported oil futures.
“With the Mexican stalemate averted and no harmful shockwaves from this weekend G-20 meeting … oil could trade favourably as WTI and Brent will continue to track the broader risk environment high,” Innes said.
Stock markets rose on Monday after a deal between the United States and Mexico to combat illegal migration from Central America late last week removed the threat of US tariffs on goods imported from Mexico.
But analysts said there were still concerns about the health of the global economy, with the United States and China locked in a trade war.
“Over the past week or so, our economists have revised down their GDP growth outlook for the US, China, India and Brazil,” Barclays bank said on Monday in a note about the economy and its impact on oil demand.
“These countries account for more than three-fourths of our oil demand growth assumptions for this year and the revisions imply a 300,000 barrels per day reduction in our current global oil demand outlook of 1.3 million barrels per day year-on-year for this year,” the British bank said.
China’s crude oil imports slipped to around 40.23 million tonnes (9.47 million barrels per day), down from an all-time peak of 43.73 million tonnes in April, customs data showed on Monday, as the world’s top importer of the commodity curbed shipments from Iran amid tighter US sanctions.
Slowing demand has also contributed to a slump into negative territory in refining profits for Asian naphtha, an important feedstock for the petroleum industry, to levels not seen in over a decade.