Oil traders have continued to exhibit confidence in the oil market, thereby ignoring a warning from Saudi Arabian Energy Minister Prince Abdulaziz bin Salman last week.
The Saudi official stated that his country would be cutting its July oil production to its lowest point in a decade excluding the Covid-19 pandemic. While the price of Brent futures rose to around $76 a barrel the day after the announcement, this gain was shortlived as traders appeared to largely ignore Salman’s warning. This comes as a surprise considering OPEC+’s decision to cut output in April took hold of prices for almost the entire month.
Although oil demand is expected to exceed supply in the coming months, two potential obstacles are preventing bulls from becoming overly optimistic. The first is the boom in Russian shipments despite Western sanctions aimed at curtailing them, while the second is a growing concern about China’s post-pandemic economic rebound.