{"id":42672,"date":"2023-07-31T14:28:27","date_gmt":"2023-07-31T18:28:27","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/commodities\/oil-up-double-digits-for-july-opecs-biggest-win-in-18-months\/"},"modified":"2023-07-31T14:28:28","modified_gmt":"2023-07-31T18:28:28","slug":"oil-up-double-digits-for-july-opecs-biggest-win-in-18-months","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=42672","title":{"rendered":"Oil up double-digits for July, OPEC\u2019s biggest win in 18 months\u00a0"},"content":{"rendered":"
\n

Investing.com — Using the megaphone to the hilt on its much-ballyhooed oil production cuts, OPEC managed to deliver for July its biggest price gain in 18 months as traders fretted over the specter of squeezed crude supplies this summer.<\/p>\n

U.S. energy demand, meanwhile, has been relatively underwhelming this month, with showing a net gain in the first three weeks without last week\u2019s data, which would only be available Wednesday. Yet, traders gave the benefit of the doubt to the Organization of the Petroleum Exporting Countries, on the bet that the math will ultimately work out for oil bulls.<\/p>\n

An hour to the settlement of Monday\u2019s trading session, U.S. West Texas Intermediate, or , crude was poised to end July at above $81 a barrel for a rough gain of more than $10, or 15% on the month. It rose to as high as $81.72 during the session, a peak not seen since April.<\/p>\n

London-based crude hovered at above $85, roughly $10, or 13%, above June\u2019s closing price. The global oil benchmark Brent rose to a three-month high of $85.47 during the session.<\/p>\n

The gain for July itself was the highest for both WTI and Brent since January 2022, after a five-week rally that began just ahead of the start of this month.<\/p>\n

\u201cCrude prices are finishing a solid month on a high note as demand prospects remain impressive and no one doubts that OPEC+ will keep this market tight,\u201d said Ed Moya, analyst at online trading platform OANDA.”<\/p>\n

But he also noted that with WTI trying to make a run for $85, \u201cexhaustion might settle in until we get beyond Friday\u2019s NFP report.\u201d<\/p>\n

The NFP, or non-farm payrolls, report refers to July\u2019s U.S. performance, which the Federal Reserve is keeping a close watch to decide how to move forward with inflation.<\/p>\n

From a four-decade high of 9% in June 2022, the Fed has managed to bring inflation, measured by the , to just 3% per annum in June this year. But the success came with a big price: the raising of by 525 basis points in just 18 months to smother the runaway inflation caused by the trillions of dollars of pandemic relief spending by the government.<\/p>\n

To keep inflation down, the Fed needs to keep a lid on U.S. jobs and wage growth. On Friday, the central bank will see how effective its high-rate regime has been in moderating these when the jobs report for July is published. Economists are forecasting a growth of 200,000 on the average for last month versus June\u2019s 209,000. The June figure was particularly an important one for the Fed as it came below economists\u2019 estimates for the first time in 16 months, signaling progress in the Fed\u2019s inflation-fighting efforts.<\/p>\n

How well the Fed does in keeping a lid on inflation will also matter to the 13-member Saudi-led OPEC and its extended OPEC+ group that includes 10 other oil producing allies steered by Russia.\u00a0<\/p>\n

OPEC+, interestingly, will be meeting on Friday too, just ahead of the release of the U.S. jobs numbers. What really matters to the oil cartel is selling its crude at the highest possible price, under the disguised term of achieving \u201cmarket balance\u201d. Until July, that aspired price was a minimum of $80 a barrel. Now, it\u2019s back to $100 and above \u2014 its long-term target.<\/p>\n

But Inflation isn\u2019t just caused by the happy spending of Americans from record jobs and wage growth. It is also egged on by higher oil prices. If the crude rally from July continues without a loss of momentum, U.S. manufacturers and service producers are likely to go back to raising the costs of goods and services in America.\u00a0<\/p>\n

It wasn’t always like this. A decade ago, oil was at $100 a barrel or around there. Then U.S. inflation was at a perma low of 2% or less as service and goods producers strove to keep costs low and consumers happy. The pandemic, however, changed everything. Faced with supply disruptions and higher material costs in almost everything, U.S. businesses began charging more \u2014\u00a0 and developed a liking for it when consumers paid without resistance. A new era of inflation was thus born.<\/p>\n

Oil bulls face the challenge of U.S. inflation, China in reboot<\/h2>\n

Now, if oil goes back to $100, it will pull up inflation appreciably \u2014 not like before.\u00a0<\/p>\n

If inflation spikes again, the Fed could turn aggressive with rate hikes again. Should the central bank add another 100 basis points to rates to temper the oil rally, that wouldn\u2019t be too good for the economy \u2014 or the oil demand that rides on U.S. growth.<\/p>\n

Aside from the Fed, OPEC also faces another challenge in the form of softer demand for oil out of China.\u00a0<\/p>\n

Data on Monday showed that Chinese manufacturing activity shrank for a fourth straight month in July, while broader business activity also deteriorated as oil\u2019s biggest buyer struggled with a slowing post-COVID economic recovery.<\/p>\n

Even then, Goldman Sachs, often Wall Street\u2019s biggest cheerleader for oil, suggested that demand for oil could have far ways to go with summer, with China readying a load of stimulus measures to reboot its economy.<\/p>\n

\u201cThe crude demand outlook is getting a boost on soft landing hopes for the US and Europe,\u201d said Moya of OANDA. \u201cThe ace up the sleeve of oil bulls is that the energy market is still awaiting massive stimulus from China that should boost global growth prospects.\u201d<\/p>\n

Those on the other side of the market will be waiting to see how all these \u2014 from the NFP report to Fed response on rates and China\u2019s demand \u2014 do, to ascertain the right selling point for crude.<\/p>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Investing.com — Using the megaphone to the hilt on its much-ballyhooed oil production cuts, OPEC managed to deliver for July its biggest price gain in 18 months as traders fretted over the specter of squeezed crude supplies this summer. U.S. energy demand, meanwhile, has been relatively underwhelming this month, with showing a net gain in […]<\/p>\n","protected":false},"author":1,"featured_media":3666,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[242],"tags":[83],"class_list":["post-42672","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-commodities","tag-featured","post_format-post-format-gallery"],"yoast_head":"\nOil up double-digits for July, OPEC\u2019s biggest win in 18 months\u00a0 | iFintechWorld<\/title>\n<meta name=\"description\" content=\"Investing.com -- Using the megaphone to the hilt on its much-ballyhooed oil production cuts, OPEC managed to deliver for July its biggest price gain in 18\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/ifintechworld.com\/?p=42672\" 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