Oil prices climbed on Monday, supported by Saudi optimism about Asian demand and an Iraqi pledge to deepen supply cuts; although uncertainty over a deal to shore up the U.S. economic recovery capped gains.
Brent crude futures rose 34 cents, or 0.8%, to $44.74 a barrel by 0641 GMT, while U.S. West Texas Intermediate (WTI) crude futures were up 47 cents, or 1.1%, to $41.69 a barrel.
Both benchmark contracts fell on Friday, hurt by demand concerns; however, Brent still ended the week up 2.5%, with WTI up 2.4%.
“Comments from the weekend from Aramco are the driver at the moment,” said Michael McCarthy, market strategist at CMC Markets and Stockbroking.
Saudi Arabian Aramco’s Chief Executive Amin Nasser said on Sunday he sees oil demand rebounding in Asia; as economies gradually open up after the easing of coronavirus lockdowns.
“He painted a rosy picture on the outlook for demand in the Asian region,” McCarthy said.
On the supply side; Iraq said on Friday it would cut its oil output by a further 400,000 bpd in August and September. This is to compensate for its overproduction in the past three months. The move would help it comply with its share of cuts by OPEC+.
The sharper cut will take Iraq’s total reduction to 1.25 million bpd this month and next.
“Saudi Arabia and Iraq forging better relationships over the oil deal are excellent for the compliance outlook,” AxiCorp market strategist Stephen Innes said in a note.
The Saudi and Iraqi energy ministers said in a joint statement that OPEC+ efforts would improve the stability of global oil markets; accelerate its balancing and send positive signals to the markets.
Hopes on stalled talks
While hopes grew on stalled talks between US Democrats and the White House on a new support package for cash-strapped US states hit by the coronavirus pandemic, delays in reaching a deal weighed on the market.
US House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin; both said they were willing to restart talks on a deal to cover the rest of 2020.
“The longer this drags on the worse it is for the demand scenario,” McCarthy also said.
He said there was strong technical resistance for WTI around $42.50 and between $45 and $45.50 for Brent.
Holidays in Japan and Singapore on Monday dampened market activity in Asia.