BNR – On Monday, oil prices jumped as leading producers Saudi Arabia and Russia declared production curbs for August. Concerns about a worldwide economic downturn and the possibility of more interest rate hikes in the United States rose after the price hike.
On Monday, Saudi Arabia announced that it will increase its voluntary reduction of one million barrels per day. According to the state news agency, the increase will last a month, including August.
Russia is working with Saudi Arabia to raise the price of oil worldwide. It will cut its oil exports by 500,000 barrels per day in August, said Deputy Prime Minister Alexander Novak on Monday. This action will only further constrain world supply.
The cutbacks represent 1.5% of global output, bringing the overall amount agreed by OPEC+ oil producers to 5.16 million bpd.
Oil Hikes Raise Concerns of Economic Downturn
Saudi Arabia and Russia have both attempted to drive up prices. Brent crude has fallen from $113 per barrel a year ago. Concerns about an economic downturn, as well as adequate supply from major suppliers, are to blame.
Brent oil futures rose 0.9%, or 70 cents, at $76.11 a barrel at 1210 GMT, after rising 0.8% the day before. Following a 1.1% increase in the previous session, US West Texas Intermediate crude climbed 1.1%, or 80 cents, to $71.44.
“Investors are turning upbeat as the second half of the year kicks off,” said PVM analyst Tamas Varga. “They expect tighter oil balance and buoyant equities also suggest that recession will be avoided, albeit probably narrowly.”
Prices dropped earlier in the day after business polls revealed a drop in worldwide industrial activity in June. This occurred as slow demand in China and Europe clouded exporters’ prospects.
On Friday, concerns of a prolonged economic downturn denting gasoline consumption grew as US inflation remained over the central bank’s 2% objective. It increased anticipation that interest rates will be raised again.
Higher interest rates may boost the dollar, increasing the price of commodities such as oil for purchasers holding other foreign currencies.