Oil prices inched lower on Monday but remained elevated following a six-week winning streak. Supply concerns spiked when Ukrainian forces attacked two Russian oil tankers in the Black Sea over the weekend.
“The Ukrainian naval drone attack on a Russian vessel over the weekend does make for some unease in a market already dealing with tightening supply,” energy analyst Vandana Hari told Bloomberg.
Despite a slight decline in prices earlier in the day, these remain higher than last week’s, still being boosted by curbs in OPEC+ production, Reuters noted in a report earlier today.
“The bullishness is in line with our expectations of a stronger second half for oil compared to the first half,” the report quoted DBS Bank energy analyst Suvro Sarkar as saying.
“But we think further upside may be limited and oil prices could consolidate around the $85 a barrel level (Brent) for a while, capped by ongoing concerns about the pace of China’s recovery and doubts about how long Saudi and Russia will continue to curb production and exports, respectively, given the spare capacity on hand,” Sarkar added.
Last week, Saudi Arabia provided an additional boost for prices when it announced it would extend its voluntary production cuts of 1 million bpd for another month in September. Days after the announcement, the Kingdom also raised its official selling prices for most buyers.
Neither move was a surprise to traders, who have regained some of their bullishness on expectations the U.S. Federal Reserve will sometime soon end its rate hikes.
Russia, meanwhile, said it would reduce exports in September by 300,000 bpd, adding to the Saudi curbs. These, by the way, Riyadh said might deepen at some point.
An additional prod for prices came from the U.S. shale patch where drilling rigs fell for the eighth week in a row to the lowest since March last year.