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| China's Manufacturing PMI - July 2023 |
Oil price has been on the increase and the production cuts announced by Russia and Saudi Arabia have already been attributed to the sudden spike that we see in the commodity markets.
China has, meanwhile, released its much-awaited monthly report on its economy, including that of its Manufacturing Purchasing Managers' Index, also know as the PMI.
According to the National Statistics Bureau of China, the PMI index has actually gone up: it is up by 0.3% since June to 49.3% during the month of July. Although it is still below the threshold, 50%, the fact that the PMI has been on the increase since May indicates that the manufacturing activities are consistently are on an upward trend.
China is upbeat about the latest development despite that being just 0.3% rise, defying the critics, who saw just the exact opposite.
Investors certainly must have seen this coming, while gauging the potential impact on the markets by the production cuts announced by Saudi Arabia and Russia for August.
The rising oil prices will leave the Western leaders in a nervous lurch, as the rampant inflation has already caused ripples across the world. Although Western governments say the inflation is coming down, consumers at the ground level says the prices of the essentials are going up!
As of Monday at 18:00 GMT, WTI and Brent recorded $81.30 and $85.75 respectively. Both WTI and Brent have been increasing for the fifth successive week and they are at their highest since April, 2023. In July, the prices gained the highest monthly gain since January, 2022.
Having buoyed by the gains, the Saudis may extend the production cuts to September as well, analysts fear.
The Biden administration so far has not commented on the development. The only option left for the US to counter the effect of production cuts on oil prices is to release its stocks from the SPR, Strategic Petroleum Reserve. It may not be that feasible at present.
In fact, the US was planning to replenish the stocks, rather than releasing the oil from the federally-owned emergency stocks, when the oil prices were around $70 a barrel; it said in June about the plan for buying 12 million barrels of oil for that purpose.
If the oil price keeps rising at the current rate, it is not going be a strategic move. The options left for the Biden administration, in these circumstances, are very limited.
With just little more than a year left before the presidential elections, the stakes for the Biden administration cannot be higher, when the rising oil prices create a myriad of potentially damaging issues.
