Russia and Saudi Arabia continue to be trusted to keep the market tight: File Image: Pixabay
After two key crude benchmarks logged their sixth consecutive weekly gain on Friday, the end of the U.S. driving season caused a dip in prices on Monday, as traders resumed their concerns about demand resiliency moving forward.
The concerns were compounded by events over the past few days in the Black Sea, where drones hit a Russian oil tanker and naval vessel, potentially threatening fuel flows on a key transport route.
Brent settled down 90 cents at $85.34 per barrel, while West Texas Intermediate settled down 88 cents at $81.94 per barrel.
Giovanni Staunovo, commodity analyst, UBS
At the moment, the oil is still flowing
Still, the inherently tumultuous crude market maintained a certain degree of stability inasmuch as offsetting concerns were signs of inflation slowing down and positive sentiment in the wake of expectations that Saudi Arabia and Russia will keep supply tight at least through September.
Additionally, hedge funds and other money managers purchased the equivalent of 51 million barrels in the six most important petroleum futures and options contracts over the seven days ending on Aug. 1.
Also, the International Energy Agency reported that oil and gas companies are expected to invest over $500 billion this year on identifying, extracting, and producing new oil and gas supplies, a sign that despite green rhetoric, fossil fuel consumption will continue to be the necessary dominant energy force until it becomes more clear that renewables can deliver consistent supply without severe degradation of global standards of living.
Indeed, oil demand is rising in several key countries such as India, whose Minister of State for Petroleum and Natural Gas noted that consumption of petroleum products increased by 10 percent to around 223 million tons in 2022/2023 thanks to strong economic growth, an increase in vehicle sales, and growing industrialization and urbanization.
It is expected that India's import dependence will increase from the current 78.6 percent to more than 80 percent within the next four years.
Meanwhile, Giovanni Staunovo, a commodity analyst at UBS, said of Monday's trading and with regard to potential Black Sea risks, "Prices tend to only react when there is a disruption; at the moment, the oil is still flowing."