Oil rose on Monday, supported by an improvement in Chinese factory data, rising energy demand and hopes for an agreement in the United States on more coronavirus-related economic stimulus. Brent crude rose 75 cents, or 1.7 per cent, to $45.15 a barrel and West Texas Intermediate (WTI) US crude was up 94 cents, or 2.3 per cent, to $41.16 a barrel. Saudi Arabian Aramco CEO Amin Nasser said on Sunday that he sees oil demand rebounding in Asia as economies gradually open up.
China’s factory deflation eased in July, driven by a rise in global oil prices and as industrial activity climbed back towards pre-coronavirus levels, adding to signs of recovery in the world’s second-largest economy.
“With oil demand still slowly grinding higher, and oil supply in check due to the OPEC+ production cut deal and prices too low to incentivise strong production growth in the United States, the oil market remains undersupplied,” UBS analyst Giovanni Staunovo said.
Iraq said on Friday it would cut its oil output by a further 400,000 barrels per day in August and September to compensate for its overproduction in the past three months.
The move would help it comply with its share of cuts by the Organization of the Petroleum Exporting Countries and allies, a grouping known as OPEC+.
“This would send out a strong signal to the oil market on various levels. That said, this would also require the international companies operating in Iraq to join in with the cuts,” Commerzbank analyst Eugen Weinberg said.
Prices also found some support after US President Donald Trump said US House Speaker Nancy Pelosi and Chuck Schumer, the top Democrat in the Senate, wanted to meet with him to make a deal on coronavirus-related economic relief.
The talks between Democrats and members of Republican Trump’s administration broke down last week.
“The longer this drags on, the worse it is for the demand scenario,” said Michael McCarthy, market strategist at CMC Markets and Stockbroking.
However, uncertainty over rising tensions between the United States and China put some pressure on prices. Trump signed two executive orders banning WeChat and TikTok in 45 days’ time while announcing sanctions on Chinese and Hong Kong officials.