New York: In a remarkable surge, the benchmark US crude oil has reached $90 per barrel, a level last seen in November. This surge is primarily attributed to production cuts enforced by Saudi Arabia and Russia in response to record global consumption.
The International Energy Agency (IEA) issued a warning this week, stating that the ongoing supply cuts by these two OPEC+ leaders could result in a “significant supply shortfall” and escalate price volatility. This alert came shortly after OPEC revealed that the market is anticipated to face a deficit of over 3 million barrels per day in the next quarter, potentially the most substantial in over a decade.
Despite this surge, concerns are growing as prices have surged by more than 30% since late June. Technical indicators like the relative strength index indicate that oil futures are nearing overbought territory. Dennis Kissler, Senior Vice President for Trading at BOK Financial Securities, noted that West Texas Intermediate is currently encountering short-term resistance at $90.04 per barrel.
Demand for oil remains robust in the United States and China, the world’s top two consumers, while OPEC+ leaders Saudi Arabia and Russia continue to limit supplies. This rally has bolstered the economies of oil-producing nations but is also raising questions about whether soaring crude prices will undermine the efforts of central banks worldwide to combat inflation.
There are signs of strength in the near term, with certain physical grades commanding substantial premiums over their benchmarks, indicating strong demand from refiners. Additionally, fuel prices are trading well above crude prices as processors strive to keep pace with robust end-user demand.
As of 10:16 a.m. in New York, WTI for October delivery had risen by 1.6% to $89.91 per barrel, while Brent for November settlement had gained 1.6% to reach $93.36 per barrel.
Source: Bloomberg
