Global oil prices edged higher on Tuesday, with Brent crude futures gaining 28 cents, or 0.39%, to trade at $72.29 per barrel. US West Texas Intermediate (WTI) crude also rose by 29 cents, or 0.26%, reaching $68.84 a barrel. These modest increases occurred as traders shifted focus from easing geopolitical tensions to prospects of increased supply and future demand.
This uptick happened despite significant increases in global oil supply. The United Arab Emirates (UAE) raised its crude output above 3.8 million barrels per day in June, its highest since April 2020. This surpassed pre-Iran war levels after the UAE left OPEC+ production quotas in May. These supply increases have eased immediate risk premiums in the market.
For Ghana, rising international fuel costs directly impact the nation's economy. Ghana imports refined petroleum products, making its economy vulnerable to fluctuations in global oil prices. Higher oil prices can lead to increased fuel pump prices locally, impacting transportation costs and the overall cost of living. Such an environment poses a risk to Ghana's inflation outlook, as previously highlighted by Deloitte. Sustained high oil prices could also strain the national budget, affecting public finances designated for fuel subsidies or other critical sectors.
Tim Waterer, chief market analyst at KCM Trade, noted the market remains cautious. He stated, “The steps towards recovery in supply have eased the immediate risk premium, but the market remains wary of putting too much faith in the stability of the current truce given the on-again-off-again nature of U.S.-Iran relations.” This highlights the underlying uncertainty despite recent easing of tensions.
Looking ahead, market participants will closely monitor demand responses, particularly from China. The Organisation of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, agreed on Sunday to further increase output targets by 188,000 barrels per day from August. This follows similar increases in June and July. Saudi Arabia also cut the August official selling price for its flagship Arab Light crude to Asia by $11 from the previous month. This was the biggest drop in over two decades, signalling a competitive market for crude exports. How effectively these supply increases are absorbed by global demand will dictate the trajectory of oil prices in the coming months.