Oil Prices Rise for Second Day as U.S. Boosts Strategic Reserves, Oversupply Concerns Linger

Oil Prices Rise for Second Day as U.S. Boosts Strategic Reserves, Oversupply Concerns Linger

Oil prices experienced a second consecutive session of gains on Monday, with U.S. initiatives to replenish strategic reserves offering support. Brent crude futures increased by 0.6%, or 48 cents, reaching $76.32 a barrel, while U.S. West Texas Intermediate crude futures climbed 0.5%, or 38 cents, reaching $71.61 a barrel by 0406 GMT.

Despite Friday’s over 2% surge, both contracts marked their seventh consecutive weekly decline, the lengthiest streak since 2018, primarily due to lingering oversupply concerns. The United States, aiming to address this, sought to acquire up to 3 million barrels of crude for the Strategic Petroleum Reserve (SPR), with deliveries scheduled for March 2024.

IG analyst Tony Sycamore said, “We know the Biden Administration is in the market looking to refill the SPR, which will provide support.” He also highlighted technical chart indicators contributing to the positive sentiment.

While the Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+, pledged to cut 2.2 million barrels per day in the first quarter, investor skepticism about the actual reduction in supply persists. Anticipated output growth in non-OPEC countries raises concerns about excess supply in the coming year.

RBC Capital Markets anticipates stock draws of 700,000 barrels per day in the first half of the year but projects a more modest 140,000 barrels per day for the entire year. Analysts at RBC emphasized that price volatility and directionlessness are expected until the market receives clear data points on compliance with voluntary output cuts.

With the implementation of cuts scheduled for the next month and production data at the country level becoming available after January, RBC analysts predict a volatile period before preliminary clarity emerges on compliance and quantifiable data.

China, the world’s leading oil importer, released its latest consumer price index data, indicating rising deflationary pressures due to weak domestic demand, casting doubt on its economic recovery. Chinese officials pledged to stimulate domestic demand and fortify the economic recovery in 2024.

Investors closely monitor this week’s central bank meetings, including the Federal Reserve, for guidance on interest rate policies. Additionally, data on U.S. inflation is under scrutiny for potential impacts on the global economy and oil demand.

EDITORIAL TEAM
EDITORIAL TEAM
TechGolly editorial team led by Al Mahmud Al Mamun. He worked as an Editor-in-Chief at a world-leading professional research Magazine. Rasel Hossain and Enamul Kabir are supporting as Managing Editor. Our team is intercorporate with technologists, researchers, and technology writers. We have substantial knowledge and background in Information Technology (IT), Artificial Intelligence (AI), and Embedded Technology.

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