Oil prices climbed on Monday, supported by Saudi optimism on Asian demand and an Iraqi pledge to deepen supply cuts, although uncertainty over a deal to shore up the economic recovery in the United States capped gains.
US West Texas Intermediate (WTI) crude futures were 1.4 percent higher at $41.80 per barrel at 05:13 GMT, while Brent crude futures were up 1 percent, at $44.86.
Both benchmark contracts fell on Friday, hurt by demand concerns, but Brent still ended the week up 2.5 percent, with WTI up 2.4 percent.
Saudi Arabian state oil giant Saudi Aramco said on Sunday its profits plunged 73 percent in the second quarter of the year, as a slump in energy demand and prices due to the coronavirus crisis hit sales at the world’s biggest crude exporter.
But the company stuck with plans to pay $75bn in dividends this year and CEO Amin Nasser said global oil demand was recovering as economies gradually open up after the easing of coronavirus lockdowns.
“Comments from the weekend from Aramco are the driver at the moment,” said Michael McCarthy, market strategist at CMC Markets and Stockbroking. “He painted a rosy picture on the outlook for demand in the Asian region.”
On the supply side, Iraq said on Friday it would cut its oil output by a further 400,000 barrels per day (bpd) in August and September to compensate for its over-production in the past three months. The move would help it comply with its share of cuts by the Organization of the Petroleum Exporting Countries and their allies, together called 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 between supply and demand and send positive signals to the markets.
US stimulus bill
Investors are also keeping a close eye on negotiations in the US over the next round of economic stimulus measures.
While hopes grew on the stalled talks between US Democrats and the White House on a new support package for cash-strapped 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 said.