Oil prices rose in early Asian trade on Monday, extending last week’s gains amid expectations of an increasingly tighter market and hopes that China’s latest stimulus measures would revitalize the economy.
WTI Crude prices were trading above $91 per barrel in early Asian trade on Monday, at $91.50, up by 0.85%. The international benchmark, Brent Crude, was above the $94 a barrel mark and traded 0.69% higher at $94.57.
Falling global inventories amid a tightening market with the OPEC+ and Saudi production cuts have supported oil prices in recent weeks.
On Friday, oil had its third consecutive week of weekly gains, lifted by the growing imbalance between demand and supply, and by China’s latest industrial output report, which showed faster-than-expected growth in August.
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One of China’s latest policy moves to jumpstart the economy has also made market participants and analysts more bullish on oil. Last week, China cut the reserve ratio for banks for a second time this year in a move to increase liquidity in the system.
“China’s stimulus policy, resilient US economic data, and OPEC+’s ongoing output cuts are the bullish factors that support the oil market’s upside movement,” Tina Teng, a market analyst at CMC Markets, wrote in a note to preview market movements this week.
Ed Moya, senior market analyst at OANDA, commented on Friday that “After a third week of gains, crude prices are not seeing the typical profit-taking as the short-term crude demand outlook gets a boost from improving US and Chinese economic data.”
“The oil market is going to stay tight a while longer, but we might need to see a fresh catalyst to send oil to triple digits,” Moya added.
Portfolio managers boosted their bullish bets on crude oil in the two weeks to September 12 in response to the extension of supply cuts from Saudi Arabia and Russia. The combined net long – the difference between bullish and bearish bets – in Brent and WTI jumped to an 18-month high, with buying led by the U.S. crude oil benchmark, said Ole Hansen, Head of Commodity Strategy at Saxo Bank.
By Tsvetana Paraskova for Oilprice.com