Oil prices saw a remarkable 1% increase, reaching a nine-month high, fueled by rising U.S. diesel futures and growing apprehensions about tight oil supplies following the extension of voluntary cuts by Saudi Arabia and Russia earlier in the week.
Brent Crude Rises Brent crude futures surged by 76 cents (0.9%) to $90.68 a barrel by 12:08 p.m. EDT (1608 GMT).
WTI Follows Suit U.S. West Texas Intermediate (WTI) crude experienced an increase of 67 cents (0.8%), reaching $87.54 per barrel.
Both crude benchmarks remained technically overbought for the sixth consecutive day, with Brent on track for its highest close since November 16 and WTI since November 11.
Over the course of the week, both benchmarks registered gains of about 3%, following last week’s impressive performance when Brent gained approximately 5% and WTI gained about 7%.
The decision by Saudi Arabia and Russia to extend their voluntary supply cuts, totaling 1.3 million barrels per day (bpd), through the end of the year continued to underpin oil prices. Analysts from Commerzbank highlighted the challenge Saudi Arabia might face in ending these cuts without causing a price decline.
Support for crude futures also stemmed from rising U.S. diesel prices, with heating oil prices up around 3% and poised for their highest close since January.
Meanwhile, the U.S. confirmed its disruption of a significant shipment of crude oil by Iran’s Islamic Revolutionary Guard Corps in April, seizing over 980,000 barrels of contraband crude oil that violated U.S. sanctions.
However, concerns about China’s demand outlook still linger in the oil market, as the world’s largest oil importer grapples with a slow post-pandemic recovery and stimulus efforts falling short of expectations.
Chinese imports and exports declined in August due to subdued overseas demand and weak consumer spending, according to recent data. Nonetheless, China tends to bolster its storage capacity even during economic slowdowns.
The oil market is also keeping an eye on a strike by workers at Chevron’s liquefied natural gas (LNG) projects in Australia, which produce about 5% of the world’s LNG supply. This could potentially bolster demand for crude.
In Germany, the lower house of parliament passed a bill aimed at reducing future fossil fuel demand by phasing out oil and gas heating systems, signaling a shift toward cleaner energy sources.
Additionally, oil traders are closely monitoring central banks in the U.S. and Europe to see if they will combat inflation through interest rate hikes, which could impact economic growth and oil demand.
“Riyadh is acutely aware of the tightrope it walks between tightening the market and upsetting any up-and-until-now progress achieved by central banks in taming price-rise driven inflation,” noted John Evans of oil broker PVM. Rate hikes have the potential to slow economic growth and reduce oil demand.
