A look back
Oil continued its bullish trajectory last week with both Brent Crude Oil and West Texas Intermediary recording their sixth consecutive weekly gains. Brent crude opened on Monday 7th August at $86.1 per barrel, with WTI opening at $82.6 per barrel.
These rises were fueled by Saudia Arabia and Russia both pledging to keep their production cuts in place for at least the remainder of Q3 2023, whilst hinting that further cuts remain possible. US unemployment also fell last week, with an extra 200,000 people finding employment, further reducing any danger of a US recession and increasing the likely demand for oil. It is therefore expected that current demand surpluses within the oil market will remain and prices are likely to continue in an upwards trajectory for the foreseeable future.
Additionally, despite a fall in UK inflation last month, the Bank of England voted once again to hike interest rates to 5.25% (a 0.25% increase) as pressure to bring inflation back under control rises. It is not thought that interest rates will be cut for a considerable amount of time, although further increase are now less likely. Nevertheless, these higher interest rates are offering the GBP some strength (GBP/USD opened this week at $1.276) which is providing some relief to British oil and fuel purchasers.
Looking Ahead
With oil markets opening at their highest levels in four months this week, stakeholders will be particularly wary of the Chinese economic data set to be released on Wednesday. Following pro-growth stimulus measures, this week’s data will deliver an important indication of the Chinese post-COVID recovery. Should both the US and China begin an upward trend, the oil market is likely to see a continuation of its’ upwards price increases.
