Brent Crude Tops $80 A Barrel for the First Time Since April

Key Insights

• Brent oil price surpasses $80 per barrel, marking the first time since April.
• Saudi Arabia and Russia’s commitments to impose production and supply restrictions contribute to the rise in oil quotes.
• Bloomberg reports a decline in Russian exports, previously unaffected by sanctions, leading to a downward pressure on oil prices.

The price of Brent crude oil exceeded $80 per barrel for the first time since April 30, 2023. September futures for Brent on the ICE exchange on Wednesday, July 12, traded at a maximum of $80.05, up 0.8% to the last close.

Contracts for WTI crude for August delivery rose in price by 1% and at a maximum price of $75.6 per barrel.

World oil prices are rising on the promise of major exporters to limit production or supply. On July 3, Saudi Arabia announced that it would extend into August a voluntary cut in oil production, which began this month, so that its daily volume would be about 9 million barrels. On the same day, Deputy Prime Minister Alexander Novak announced that Russia would voluntarily cut oil supplies by 500,000 bpd in August.

Russian exports, which have been growing despite Western sanctions, have been a deterrent to the market, but are now starting to decline, Bloomberg says. Average deliveries of Russian oil fell below the February average, the agency writes.

According to data from the US Energy Information Administration (EIA), Bloomberg reports that the global oil market is anticipated to experience ongoing contraction, with stocks expected to increase until 2024.

Against this background, prices for Russian oil are also rising. According to Argus, the cost of Urals on Tuesday, July 11, approached $60 per barrel, the ceiling price set by Western countries as part of the sanctions.

As reported by Bloomberg, if Russia surpasses this threshold, it will showcase its ability to independently deliver its oil to buyers across the globe, without depending on Western companies that have been restricted from transporting Urals above the specified price level.

Market Resilience Amidst Inventory Increases and Positive Price Outlook

According to the recent monthly Short Term Energy Outlook by the EIA, crude prices are projected to average around $80 per barrel until the end of the year. This projection is based on expected demand growth from China and India, along with stronger-than-anticipated economic growth in the US.

The market response to the data released by the American Petroleum Institute was relatively subdued. Last week’s data revealed a 3 million barrel increase in US commercial crude inventories, along with a 1 million barrel increase in gasoline stocks and a 2.9 million barrel increase in distillate stocks.

Similarly, the official inventory data from the EIA showed a nearly 6 million barrel increase in crude stocks, but its impact on the market was minimal.