Oman oil prices rise, seen approaching near $90 a barrel

Muscat: While crude prices have been rising since the beginning of July, Oman oil price continued its rise approaching towards $90 a barrel.

Oman oil (October delivery 2023) reached $89.03 on Thursday, the Dubai Mercantile Exchange (DME) said. This comprised a rise by $1.17 from the price on  Wednesday which stood at $87.86. “The average price of Oman oil (August delivery 2023) has stabilised at $74.78 per barrel, thus 16 cents per barrel lower than July delivery 2023.”

As a result, global and Omani oil prices could remain on an uptrend over the short to medium term but could be confronted with some volatility as economic conditions continue to change, Denys Peleshok, Head of Asia at CPT Markets, said in an exclusive interview to Times of Oman.

“The uncertainty around how monetary policies in the major economic areas could change and how they might impact local economies could also remain a source of risks over the medium to long term,” he further added.

Both oil producers have announced that they would extend their production cuts to include September which could result in tighter supply over the medium term and could maintain and widen these measures if necessary. “As a result, we could see oil prices continuing their ascension and with them, the Omani oil benchmark potentially pushing towards the 90 dollar mark over the short term,” he added.

Oil prices have been rising since the beginning of July after a period of sideways trading and volatility. While prices remain at lower levels than those seen last year, they could maintain an uptrend as conditions could remain favourable.

“Last year, oil prices went above 130 dollars while historically they have surpassed 146 dollars in 2008 but remained below 88 dollars until now this year,” Denys Peleshok said.

While concerns about the global economy and a weaker-than-expected Chinese economic recovery have created some doubts about the strength of the demand for oil, OPEC+ members have moved in to support the market. “The organisation has reined in production levels with Saudi Arabia and Russia implementing voluntary cuts to their production levels,” he further added.

The Ukrainian conflict could also continue to pose some risks for oil supplies as Russian exports could be targeted in the black sea. Incidents in the area could push crude prices even further to the upside while the conflict shows no signs of abating. With supplies already tightening, reduced export volumes from Russia could strongly boost prices.

“On the other hand, demand for oil could continue to outstrip supply levels and could help crude prices maintain their current trend. Oil consumption was fuelled by stronger air travel and Chinese demand despite the weaker-than-expected economic recovery,” Denys Peleshok said. However, demand levels could remain exposed to the development of the global economy and Chinese growth in particular due to the large amounts of oil imports the country commands, he added.