SINGAPORE – Oil prices surged for the third consecutive session on Monday, driven by predictions of a widening supply deficit in the fourth quarter. This was influenced by the decision of Saudi Arabia and Russia to extend production cuts and positive outlook for demand recovery in China.
Brent crude futures climbed by 0.8 percent, or 71 cents, reaching $94.64 per barrel by 0622 GMT. Meanwhile, U.S. West Texas Intermediate crude futures rose by 0.9 percent, or 78 cents, reaching $91.55 per barrel.
CMC Markets analyst Tina Teng highlighted that China’s stimulus policy, strong U.S. economic data, and ongoing output cuts by OPEC+ are the key factors supporting the upward movement of the oil market.
READ: China cuts banks’ reserve ratio for second time in 2023 to aid recovery.
The upcoming decisions and commentaries by central banks, including the U.S. Federal Reserve, regarding interest rates and important economic data from China will be closely monitored by traders.
Brent and WTI have experienced three consecutive weeks of growth, reaching their highest levels since November. Furthermore, they are on track for their biggest quarterly increase since the first quarter of 2022, which saw Russia’s invasion of Ukraine.
ANZ analysts mentioned that the output cuts by Saudi Arabia and Russia could create a 2 million barrels per day (bpd) deficit in the fourth quarter. Consequently, a reduction in inventories may expose the market to further price spikes in 2024.
READ: Oil jumps 2% to near 10-month high as OPEC predicts tight supplies.
Saudi Arabia and Russia have extended their supply cuts until the end of the year as part of the OPEC+ group’s plans. Additionally, Chinese refineries have ramped up their output due to favorable export margins.
Analyst Edward Moya from OANDA stated that prices are expected to surpass $90 per barrel, placing greater emphasis on the demand outlook from the world’s two largest economies.
ANZ forecasts that global oil demand growth will reach 2.1 million bpd, consistent with predictions from the International Energy Agency and OPEC.
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