Oil up on supply limit fears

Written on 07/19/2023
Team UCapital 24

Oil prices were higher on Wednesday as the energy market gained traction despite concerns around an uncertain demand outlook.

A barrel of Brent fetched USD79.99 around 1200 BST on Wednesday, up from USD78.78 at the same time on Tuesday. West Texas Intermediate firmed to USD75.82 a barrel from USD74.47.

Energy prices inched up on Wednesday, extending a recovery that started on Tuesday.

"Since breaking above the recent range highs late last week, oil prices have been a little choppy although importantly they have held above that prior range and, in the case of Brent crude, seen support around the previous highs," Oanda analyst Craig Erlam commented.

In recent sessions, traders have been torn between energy supply worries and uncertainty around the demand outlook.

Crude oil production cuts by OPEC+ have helped provide support.

Saudi Arabia and Russia, OPEC+ heavyweights, have extended their voluntarily crude oil production reduction to next month.

Other members of the cartel in June agreed to extend earlier cuts in supply through the end of 2024. These cuts were announced in April.

But dismal economic data, especially from China, have raised questions about the health of energy demand outlook.

"While oil has been on a nice run higher over the past week there is still some lingering concern stemming from China as the economic numbers this week did not paint a pretty picture," said Tim Waterer, chief market analyst at KCM Trade.