Oil rose $1 a barrel on Tuesday as tight supply came back into focus on the idea of OPEC+ output cuts to support prices and the prospect of a decline in US crude inventories.
The Saudi energy minister said OPEC+ had the resources to meet challenges, including cutting production, state news agency SPA said Monday, citing comments Abdulaziz bin Salman made in an interview to Bloomberg.
The global benchmark Brent oil gained $1.32 or 1.4 percent to $97.80 a barrel. US West Texas Intermediate crude rose $1.65, or 1.8 percent, to $92.01.
“Whether it is right to cut OPEC or OPEC+ production after September is debatable,” said Tamas Varga of oil broker PVM. “Despite recent inflation-induced weakness, the oil market appeared to have bottomed recently.”
The price of oil surged in 2022 and came close to a record high of $147 in March, after Russia’s invasion of Ukraine exacerbated supply concerns. Concerns about a global recession, rising inflation and weaker demand weighed on prices ever since.
Attention is also paid to the prospect of a nuclear deal between Iran and world powers that would enable Iran to boost oil exports. A senior US official told Reuters on Monday that Iran had dropped some of its key demands to revive a deal.
While the price of Brent futures has fallen sharply from this year’s high, the market structure and price differentials in the physical oil market still point to a supply shortage.
In comments reported Monday, the Saudi minister said the paper and physical oil markets had become “disconnected”.
The latest weekly US inventories reports underscore the tight supply and are expected to see a drop of 1.5 million barrels of crude oil. The first of this week’s two reports will be released at 2030 GMT from the American Petroleum Institute.