Oil rose in the wake of more tensions in the Middle East and the surprise incursion by Ukrainian forces into parts of southern Russia, near the city of Kursk (scene of a major tank battle in the Second World War).
And in Asia, thermal coal prices jumped as China’s huge heat wave continued across much of the country’s east, driving coal imports higher.
In the U.S., investors grew up, stopped whining about a recession, and rediscovered the reality that the economy isn’t tanking—it may be a touch softer than expected, but not tanking. So concerns about a slowdown hitting U.S. oil demand eased. The net result was a gain in prices for the first time in weeks.
Brent crude is trading higher at around US$79.46, down on the day but up 2.45% for the week. U.S. West Texas Intermediate (WTI) edged up to close the week at US$76.98, a gain of 3.83% for the week.
Friday also saw a surprise rise in the number of oil rigs operating in the U.S. last week. Data from Baker Hughes, the oil services company, showed a rise of three to 485 from 482 the week before. That was still well under the 500 at the end of 2023. Active gas rig numbers fell by one to 97, while miscellaneous rigs were flat at six. Overall, 588 rigs were operating in the U.S. this week, down from 654 a year earlier.
Reports suggest that “Iran wants to avoid a region-wide war that could disrupt oil and gas flows from the Middle East,” according to a report from Saxo Bank. However, supply risks remain, particularly because of a production halt at Libya’s biggest oilfield, Head of Commodity Strategy Ole Hansen said.
“Crude oil continued its recovery from its recent plunge as elevated geopolitical risks came into focus,” said ANZ analyst Daniel Hynes.
Meanwhile, thermal coal prices hit four-month highs last week as the very hot weather in parts of China dragged in coal from across Asia, even higher grades sold out of Newcastle to buyers in Japan and South Korea.
The ICE front month (September) price topped US$150 a tonne for the first time since mid-April, ending the week at US$150.50 a tonne. Thermal coal with an energy content of 6,000 kilocalories or more is exported out of Newcastle, which is the biggest coal port globally.
The Newcastle price rose more than 3% last week and is up from just over US$133 a tonne on July 25. That’s a rise of more than 12% in two weeks.
Driving the price is the continuing rise in Chinese imports—up 17.7% year on year in July at just over 46 million tonnes and up more than 13% at 296 million tonnes, heading over half a billion tonnes on current projections.