Oil prices remained strong, hovering near a 10-month peak, as the market grappled with a delicate balance between supply concerns stemming from Libya’s output disruption and ongoing OPEC+ cuts, and the headwinds presented by global macroeconomic factors.
Brent Futures Hold Ground: Benchmark Brent futures registered a modest gain of 8 cents (0.1%) to reach $92.14 a barrel by 0630 GMT.
WTI Follows Suit: U.S. West Texas Intermediate (WTI) crude also climbed by 13 cents (0.2%) to $88.97 a barrel.
Both Brent and WTI benchmarks had surged nearly 2% on the preceding day, marking their highest levels since November 2022.
Satoru Yoshida, a commodity analyst with Rakuten Securities, noted, “Bullish demand outlook by OPEC and the U.S. Energy Information Administration’s (EIA) prediction of a decline in global oil inventories reinforced market views of tightening supply going forward.”
Further bolstering oil prices was the news of Libya, an OPEC member, temporarily shutting down four of its eastern oil export terminals due to a deadly storm. This development added to the supply concerns.
However, Yoshida also pointed out that “further gains may be limited as there is also downside pressure from lingering worries over weaker demand in China,” reflecting the ongoing economic uncertainties in the world’s largest oil importer.
OPEC maintained its positive outlook for robust growth in global oil demand for 2023 and 2024, citing signs of resilience in major economies despite challenges like high interest rates and elevated inflation.
To keep supplies tight, Saudi Arabia and Russia recently extended their voluntary supply cuts, amounting to a combined 1.3 million barrels per day, until the end of the year. The coalition of OPEC, Russia, and allied producers, known as OPEC+, continues to influence market dynamics.
Additionally, Russia’s oil production is projected to decline by 1.5% to 527 million metric tons (10.54 million barrels per day) in the current year, according to a report citing an interview with Energy Minister Nikolai Shulginov.
Meanwhile, the U.S. Energy Information Administration (EIA) forecasted a significant drop in global oil inventories by nearly half a million barrels per day in the second half of 2023. This outlook has contributed to rising oil prices, with Brent expected to average $93 per barrel in the fourth quarter.
The oil market also witnessed a notable spread between front-month Brent futures contracts and those for delivery six months further out, reaching $4.68 a barrel. This tight spread underscores market expectations of near-term supply constraints.
However, on the flip side, U.S. crude oil, distillate, and gasoline inventories posted increases in the latest data. Crude stocks saw a rise of approximately 1.2 million barrels, gasoline inventories surged by around 4.2 million barrels, and distillate inventories grew by roughly 2.6 million barrels.
As the market remains in a state of flux, investors eagerly awaited U.S. inflation data, focusing on whether a softer core inflation reading would be sufficient for the Federal Reserve to maintain its current interest rate stance into the next year. These economic factors will continue to play a significant role in shaping oil prices in the coming days.