Oil prices made a modest recovery on Tuesday, partially offsetting losses from the previous session, as traders focused on supply cuts implemented by major oil exporters Saudi Arabia and Russia, as well as a weakened dollar. Brent crude futures saw a 0.49 percent increase, rising by 38 cents to reach $78.07 per barrel, while US West Texas Intermediate crude climbed by 40 cents or 0.55 percent to $73.39.
On Monday, prices had experienced a 1 percent decline due to mounting expectations of further interest rate hikes in the United States, alongside profit-taking by investors following a 4.5 percent surge in the previous week.
The upcoming supply cuts by Saudi Arabia and Russia in August contributed to bolstering benchmark prices. Furthermore, the depreciation of the US dollar to a two-month low added support to oil prices. A weaker dollar reduces the cost of crude for holders of other currencies, often driving up oil demand.
Last week, Saudi Arabia announced an extension of its 1 million barrels per day supply cuts until at least August, while Russia revealed plans to reduce its oil exports by 500,000 barrels per day in the following month.
IEA Predicts Tightening Oil Market with China Demand and OPEC+ Cuts
Despite a sluggish global economy, the International Energy Agency (IEA) anticipates a tight oil market in the second half of the year. The combination of oil demand from China and other developing nations, coupled with the production cuts implemented by the Organization of the Petroleum Exporting Countries and its allies (known as OPEC+), is expected to keep the market tightened. Fatih Birol, Chief of the IEA, highlighted the resilience of China's demand and the significance of the production cuts in key oil-producing nations as factors contributing to this potential tightening.
BP Settles US Market Manipulation Case for $10.75 Million
Oil major BP has reached an agreement to pay a civil penalty of $10.75 million to resolve allegations that its traders manipulated natural gas markets in 2008. The settlement, disclosed in a filing by US energy regulators, is less than the amount BP had previously settled in the case. The US Federal Energy Regulatory Commission accused BP of violating the Natural Gas Act through manipulative activities in the next-day gas market at Houston Ship Channel during the period from mid-September to November 2008. BP had paid a civil penalty of $24.35 million in December 2020 and a disgorgement of unjust profits of $250,295 in January 2021. However, the company contested those penalties and appealed the case to the US Court of Appeals for the Fifth Circuit. The court remanded the matter back to FERC for reassessment, leading to the recent settlement.
Poland Advocates for NATO Pipeline Extension to Eastern Flank
Ahead of the NATO summit, President Andrzej Duda of Poland expressed his country's desire for NATO to discuss extending its Cold War-era oil pipeline system further east. Duda emphasized that the current pipeline system ends in Germany, as a remnant of infrastructure built during the Cold War. Poland, having been a NATO member for over 20 years, aims to secure financing from the alliance to expand the pipeline network to reach NATO's eastern flank. The Central Europe Pipeline System operated by NATO is a high-pressure network responsible for transporting jet fuel, gasoline, diesel fuel, and naphtha across Belgium, France, Germany, Luxembourg, and the Netherlands.