Crude oil prices experienced a surge on Thursday, driven by indications of robust economic activity in the U.S. and expectations of tighter supply conditions in the upcoming months.
At 09:10 ET (13.10 GMT), U.S. crude futures witnessed a 1.3% increase, reaching $79.83 per barrel. Simultaneously, the Brent contract climbed by 0.9% to $83.33, with both contracts reaching levels not seen since mid-April.
The crude oil benchmarks received a significant boost from the news that the U.S. economy, the world’s largest and leading crude consumer, grew by 2.4% annually during the April to June period. This figure surpassed expectations, which had projected a growth rate of 1.8%.
The accelerated reading is a positive sign, indicating that the U.S. economy remains relatively strong, even amidst the Federal Reserve’s assertive policy tightening. On Wednesday, the Fed took another step in this direction.
Oil markets have seen four consecutive weeks of gains, largely influenced by decisions from Saudi Arabia and Russia, the world’s major oil exporters. These countries have opted to cut an additional combined 1.5 million barrels per day from their July production levels, effective from August.
The move has raised questions about how Saudi Arabia will approach these cuts moving forward, whether they will extend them into September or gradually phase them out. Analysts at ING believe the recent price strength could give the Saudis the confidence to consider unwinding these cuts.
However, careful management is essential to avoid exerting renewed pressure on the market.
Despite the positive market sentiment, crude oil experienced a decline on Wednesday after government data revealed that U.S. crude inventories only fell by a quarter of the anticipated levels for the previous week.
This occurred despite an end to supply injections from the national reserve, leading to concerns about U.S. demand during the peak summer travel period, which would usually result in substantial inventory draws.
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