MELBOURNE (Reuters) – Oil prices climbed on Monday, backed by Saudi optimism over Asian demand and an Iraqi commitment to deepen cuts in supply, despite uncertainty over a deal to curb US economic recovery gains.
FILE PHOTO: The sun is seen behind a crude oil pump jack in the Permian Basin in Loving County, Texas, USA, November 22, 2019. REUTERS / Angus Mordant / File Photo
Brent crude LCOc1 futures rose 34 cents, or 0.8%, to $ 44.74 per barrel by 0641 GMT, while U.S. West Texas Intermediate (WTI) crude CLc1 futures rose 47 cents, or 1.1%, to $ 41, 69 per barrel.
Both benchmark contracts fell Friday, hurt by concerns about demand, but Brent ended the week still up 2.5%, with WTI at 2.4%.
“Aramco’s weekend comments are the driver at the moment,” said Michael McCarthy, marketing strategist at CMC Markets and Stockbroking.
Saudi Arabian Aramco’s (2222.SE) Chief Executive Amin Nasser said on Sunday that he sees the oil demand in Asia looking back as economies slowly open up after the coronavirus lockon was destroyed.
“He painted a pink picture about the prospect of demand in the Asian region,” McCarthy said.
On the supply side, Iraq said on Friday that it would reduce its oil production in August and September by another 400,000 barrels per day to compensate for its overproduction in the past three months. The move would help meet its share of cuts by the Organization of Petroleum Exporting Countries and its allies, collectively called OPEC +.
The sharper cut will take Iraq’s total reduction to 1.25 million bpd this month and next.
“Saudi Arabia and Iraq to improve oil relations are excellent for the prospect of compliance,” AxiCorp brand strategist Stephen Innes said in a note.
The Saudi and Iraqi energy ministers said in a joint statement that OPEC + efforts would improve the stability of global oil markets, accelerate their balancing and send positive signals to the markets.
While hopes grew at stagnant talks between U.S. Democrats and the White House over a new cash-strapped U.S. state aid package hit by the coronavirus pandemic, delays in reaching a deal are weighing on the market.
US House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin both said they were ready to resume talks on a deal to cover the rest of 2020.
“The longer this lasts, the less it is for the demand scenario,” McCarthy said.
He said there was strong technical resistance for WTI around $ 42.50 and between $ 45 and $ 45.50 for Brent.
Holidays in Japan and Singapore on Monday dampened market activity in Asia.
Report by Sonali Paul; edited by Richard Pullin
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