Oil prices continued their upward trajectory for the third consecutive session on Monday. The surge was driven by predictions of an expanding supply deficit in the fourth quarter, stemming from decisions by Saudi Arabia and Russia to extend production cuts. Additionally, optimism regarding a recovery in demand in China further boosted oil prices.
As of 0622 GMT, Brent crude futures had increased by 71 cents, or 0.8%, reaching $94.64 per barrel. Meanwhile, U.S. West Texas Intermediate crude futures were at $91.55 per barrel, marking an increase of 78 cents, or 0.9%.
Analyst Tina Teng from CMC Markets noted that several factors were contributing to the bullish movement in the oil market. These include China’s stimulus policy, robust U.S. economic data, and the ongoing output cuts by OPEC+ members.
The recent reserve ratio cut by China’s central bank aimed to inject liquidity into the economy and support its growth prospects. In addition to these factors, market participants are closely monitoring central bank decisions and related commentary, including those from the U.S. Federal Reserve. Key economic data from China will also be pivotal in shaping market sentiment.
Both Brent and WTI crude prices have posted gains for three consecutive weeks, reaching their highest levels since November. They are on course for their most substantial quarterly increase since the first quarter of 2022, coinciding with Russia’s invasion of Ukraine.
The extended supply cuts by Saudi Arabia and Russia could result in a fourth-quarter deficit of 2 million barrels per day (bpd). This could subsequently lead to a depletion of inventories, potentially exposing the market to further price spikes in 2024, according to analysts at ANZ.
Chinese refineries have increased their output, driven by strong export margins. Edward Moya, an analyst at OANDA, suggested that prices may comfortably remain above $90 per barrel. As a result, the focus could shift towards assessing the demand outlook in the world’s two largest economies.
ANZ forecasts that global oil demand growth will reach 2.1 million bpd, aligning with projections from the International Energy Agency and the Organization of the Petroleum Exporting Countries (OPEC).
