September 19, 2023 (MLN): Oil prices rallied to a 10-month high amid fresh signs of tightness driven by supply cuts from OPEC+ leaders.
Brent crude is currently trading at $95.07 per barrel, up by 0.68% on the day, a level last seen in November 2022.
While West Texas Intermediate crude (WTI) is trading at $91.3 per barrel, up by 0.79% on the day.
Brent Crude prices have surged by more than 30% since mid-June amid Saudi Arabia and Russia's decision to reduce their oil exports to clear the excess supply.
Moreover, the rise in oil prices has also been supported by a better economic outlook in the US and China, the two largest economies in the world.
However, this increase in energy costs may also heighten inflationary pressures, making it harder for central bankers to manage.
To note, US CPI has started to see a second wave of increase, recorded at 3.7% YoY and 0.6% MoM in August, which was the highest MoM rise since June 2022.
Premiums for physical barrels are surging as refiners struggle to make enough diesel ahead of a seasonal ramp-up in demand, as Bloomberg reported.
The tighter market has spurred predictions from the likes of Chevron Corp. Chief Executive Officer Mike Wirth that $100 oil will return.
“Risks of a short-term spike to $100 may be rising with the current momentum but we have little conviction it would be sustainable,” said Charu Chanana, market strategist at Saxo Capital Markets Pte.
“Higher inflation could mean tighter monetary policies and OPEC+ can’t control the demand side.”
Saudi Arabia Energy Minister Prince Abdulaziz bin Salman said on Monday that the Organization of Petroleum Exporting Countries is working to keep oil markets stable and improve global energy security, without targeting any specific price level.
Output plans will be reviewed every month, he said.
Underlying market metrics point to near-term tightness. Brent’s three-month spread has widened to $3.85 a barrel in backwardation, a bullish pattern. That compares with a differential of $1.26 a barrel about a month ago, it added.
Copyright Mettis Link News
Posted on: 2023-09-19T09:41:11+05:00
