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OPEC+ Output Cuts Are Finally Translating Into Higher Oil Prices

The release of U.S. inflation data suggesting a nearing peak in interest rates has brought relief to the world's largest economy. Modest consumer price increases in June, coupled with the smallest annual rise in over two years, have alleviated concerns about potential interest rate hikes by the Federal Reserve. This positive development has set the stage for a remarkable rally in September WTI crude oil, driven by supply cuts from major producers and a favorable demand outlook.

Bullish Supply Outlook

Oil prices have surged by an impressive 12% in just two weeks, fueled by significant supply cuts from Saudi Arabia and Russia. These production reductions have effectively tightened the market, as evidenced by the rise in the premium of front-month Brent contracts to future contracts. This success in market support by OPEC has played a crucial role in shifting investor sentiment away from bearish sentiments. Furthermore, Saudi Arabia's decision to extend its unilateral production cut has bolstered investor confidence and contributed to a more positive outlook.

Demand Outlook and Tight Market Conditions

Investor confidence in crude oil has been revitalized, leading to increased investments, particularly in petroleum futures and options contracts. This shift in sentiment has played a vital role in alleviating extreme pessimism that gripped the market at the end of June. The oil market is expected to maintain its tightness in the coming months due to robust…

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EXXON Mobil -0.35
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