Crude oil prices reached a nine-month peak during Monday's intraday trading, driven by expectations of additional supply cuts by Saudi Arabia, signs of economic recovery in China, and the anticipation that the Federal Reserve would maintain stable interest rates to support the U.S. economy.
Brent Crude November futures jumped 0.50% in today's trade to $89 per barrel, which is the highest level since December last year. Similarly, WTI October futures hit a nine-month high of $85.95 per barrel.
On Friday, a private-sector survey showed that China's factory activity expanded in August, with supply, domestic demand, and employment improving, suggesting official efforts to revive growth might be having some effect.
The Caixin/S&P Global manufacturing purchasing managers' index (PMI) rose to 51.0 in August from 49.2 in July, beating analysts' forecasts of 49.3 and marking the highest reading since February, Reuters reported.
On the supply side, Saudi Arabia is expected to extend its 1 million barrels per day output cut into October to bolster energy prices, according to analysts. Earlier in August, the kingdom extended the voluntary cut into September, with the country's energy ministry saying that it could be "extended or extended and deepened".
The initial announcement of 1 million barrel per day cut was made in June 2023 after a meeting of the alliance between the Organization of the Petroleum Exporting Countries, Russia, and other smaller producers.
Last week, Russian Deputy Prime Minister Alexander Novak said that Russia agreed with its OPEC partners on the parameters for continued export cuts.
These production cuts have significantly contributed to the upward trajectory of oil prices, with both Brent and WTI experiencing gains over the past four months. From May 2023 lows of $63.64, Brent crude has risen 25% to date, and WTI crude has also rallied 25%.
In addition, the US economy added 187,000 jobs in August 2023, compared to the downwardly revised 157,000 in July and more than market expectations of 170,000. Still, it was the third consecutive month with job gains falling below the 200,000 threshold, indicating a gradual easing of labor market conditions, largely attributed to the Federal Reserve's significant interest rate hikes aimed at cooling down inflation, according to Trading Economics.
Meanwhile, India's import of cheap Russian oil plunged to its lowest in seven months in August as monsoon rains dampened demand. The world's third-largest oil consumer reduced imports from Russia for a third consecutive month in August.
India imported 1.46 million barrels a day from Russia in August, down from 1.91 million barrels purchased in the previous month, according to data from energy cargo tracker Vortexa.
Indian refiners also cut imports from Iraq, another top supplier, to 866,000 barrels per day from 891,000 bpd. Some of those volumes were replaced by a short surge in imports from Saudi Arabia, which jumped to 820,000 bpd from 484,000 bpd in July, the data showed.
From a market share of less than 1% in India's import basket before the start of the Russia-Ukraine conflict in February last year, Russia's share in India's imports hit a peak of about 2 million bpd in May as refiners vied for heavily discounted shipments.
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