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Oil Returns Above $100 With Saudis Cautious About More Output

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·2 min read
Oil Returns Above $100 With Saudis Cautious About More Output
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(Bloomberg) -- Oil rallied above $100 after the Saudis declined to make any promises regarding future output increases, while a weaker dollar also helped put wider commodity markets on firmer footing.

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West Texas Intermediate rose 5.1% to settle above $102 a barrel on Monday. Saudi ministers insisted at the conclusion of President Joe Biden’s visit last week that oil policy decisions would be dictated by market logic and with coalition agreement. Iraq’s oil minister told Bloomberg he sees oil trading above $100 for the rest of the year.

This week’s opening rebound is largely driven by a weaker US Dollar and higher equity markets, said Dennis Kissler, senior vice president of trading at BOK Financial. “Saudi Arabia gave no signs of immediate production increases coming, which sums up to last week’s selloff probably being overexaggerated.”

Crude has slumped since mid-June as concerns about a potential recession ripped through commodity markets, eroding gains that followed Russia’s invasion of Ukraine. Nonetheless, Biden remains eager to get the Organization of Petroleum Exporting Countries to add supplies to bring prices down further and help quell inflation.

OPEC and its allies next meet on Aug. 3 after members agreed to revive the crude supplies that were halted during the coronavirus pandemic. Analysts at RBC see Saudi Arabia and a handful of other producers likely to making another modest supply hike.

The kingdom will likely “craft an arrangement to compensate for the members that have consistently failed to meet their monthly production targets,” Helima Croft, chief commodities strategist at RBC Capital Markets, wrote in a report.

Elsewhere, Libya was in the process of restarting crude shipments. Prime Minister Abdul Hamid Dbeibah said the country’s exports are on track for a full resumption after months of outages as he justified his replacement of the leadership at state-run oil National Oil Corp.

South Africa’s largest fuel producer declared force majeure on the supply of petroleum products due to delays in crude deliveries to the Natref refinery it jointly owns.

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