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The Rise in Prices Was Driven by Expectations of an Agreement Between Washington and Beijing and by Signs of Restriction in the Global Supply of the Commodity.
Futures contracts for oil closed higher on this Monday (6/9), continuing the 6% increase accumulated last week. Investor optimism is anchored in trade negotiations between the United States and China, as well as indications of a tighter supply of the product in the global market.
Brent and WTI Prices Rise with Expectations of an Agreement
The oil market reacted positively to discussions between the two largest economies in the world. On the Intercontinental Exchange (ICE), Brent oil for August delivery rose 0.86%, trading at US$ 67.04 per barrel. Meanwhile, on Nymex, WTI for July increased by 1.10%, closing at US$ 65.29 per barrel.
Optimism was fueled by a meeting between officials from both countries in London, which took place after a phone call between Presidents Donald Trump and Xi Jinping last Thursday (5). Investors believe that a trade agreement could improve the outlook for the global economy and, consequently, increase demand for oil.
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According to Dennis Kissler from BOK Financial, “the stage of the tariffs will likely be negotiated soon”.
Supply and Demand Factors Driving the Oil Market
In addition to the trade scenario, other factors contributed to the rise in prices. The drop in the number of active oil rigs in the United States signals a potential tightening of U.S. supply.
At the same time, seasonal demand for fuels tends to increase with the arrival of summer in the Northern Hemisphere. Kissler also points out that the production of the Organization of the Petroleum Exporting Countries and its Allies (Opec+) remains below estimates, which helps support prices.
Volatility Marked by Chinese Data at the Start of Trading
Despite the closing increase, the day started with losses. Brent and WTI prices dropped by 0.6% at the start of trading. The momentary drop was a reaction to the release of weak trade balance data from China. The country’s exports grew by 4.8% in May, below expectations. Furthermore, Chinese imports of oil decreased compared to the previous year.
Tensions in Iran and the Risk to Global Oil Supply
One point of concern for the oil market comes from the geopolitical scenario. The Director-General of the International Atomic Energy Agency (IAEA), Rafael Grossi, reported that Iranian authorities are considering developing an atomic bomb if their nuclear facilities are attacked by Israel.
If this threat materializes, it is likely that the U.S. and its allies would impose additional sanctions on Iranian oil. Such measures would reduce the global supply of the commodity, putting further upward pressure on prices.
With information from Dow Jones Newswires via Eixos website.
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