Crude oil futures concluded last week on a resounding high, reaching their peak for the year, driven by escalating apprehensions over constrained oil supplies. On Friday, September 15th, the oil market marked a historic milestone, with prices ascending for the third consecutive week.
WTI Crude Oil Futures Soar
WTI (West Texas Intermediate) crude oil futures experienced a noteworthy upturn, surging by 61 cents, equivalent to 0.7%, to culminate at $90.77 per barrel. This closing price represents the loftiest level witnessed since November 7, 2022, and, over the course of the week, WTI crude futures exhibited a formidable surge of 3.7%.
BRENT Crude Futures Join the Rally
In a parallel development, BRENT crude futures also registered an uptick, ascending by 23 cents or 0.3%, achieving a closing rate of $93.93 per barrel. The robust performance of BRENT crude futures added to the overall bullish sentiment in the oil market, translating into a weekly gain of 3.6%.
Tight Oil Supplies Drive Price Momentum
The rallying of oil prices can be traced back to growing apprehensions regarding the constricting availability of oil supplies. Notably, Saudi Arabia recently unveiled an extension of its voluntary oil production cut by 1 million barrels per day, slated to persist until the year’s end. In parallel, Russia has prolonged its oil export cut, curtailing exports by 300,000 barrels per day through the end of the year. These collaborative actions by prominent oil-producing nations underscore their collective resolve to tackle the prevailing supply-demand imbalance.
OPEC’s Demand Prognosis
The Organization of Petroleum Exporting Countries (OPEC) released a comprehensive report, heralding robust demand projections. The market anticipates the potential occurrence of an oil shortage this year if oil producers continue their downward trajectory in production capacity. This outlook has fortified the upward pressure on oil prices.
China’s Economic Data Bolsters Confidence
China, a pivotal player in the global economy, bolstered oil prices by disclosing industrial output and retail sales figures for August that exceeded expectations. These encouraging economic indicators from China augmented overall market confidence and buttressed the upward trajectory of oil prices.
Central Banks’ Influence on Oil Prices
Further boosting the oil market, the European Central Bank (ECB) conveyed signals of potentially terminating interest rate hikes. In the meantime, prevailing expectations suggest that the Federal Reserve (Fed) will uphold its current interest rates at the upcoming meeting. These developments in central bank policy carry implications for broader financial markets, with repercussions felt in the oil market as well.
In conclusion, the oil market capped the week with an extraordinary surge as apprehensions regarding tight oil supplies took center stage. With prices scaling new peaks for the year and major oil-producing nations extending production cuts, the market continues its bullish ascent. Augmented by optimistic economic data from China and the supportive policies of central banks, the energy market maintains an optimistic outlook.
The Spot Market is Open
Saturday, September 16, 2023