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Oil prices extend gains towards $95 on tight supply
Published by Jessica Weisman-Pitts
Posted on September 18, 2023
3 min readLast updated: January 31, 2026
Global Banking & Finance Review®
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Published by Jessica Weisman-Pitts
Posted on September 18, 2023
3 min readLast updated: January 31, 2026
By Natalie Grover
LONDON (Reuters) – Global oil benchmark Brent crude neared $95 a barrel on Monday, with investors focused on the prospect of a widening supply deficit in the fourth quarter after Saudi Arabia and Russia extended supply cuts.
Brent crude futures rose 47 cents to $94.40 a barrel by 1421 GMT while U.S. West Texas Intermediate crude futures were up 79 cents at $91.56. WTI climbed by more than $1 earlier in the session.
Brent and WTI have climbed for three consecutive weeks to touch their highest since November and are on track for their biggest quarterly increases since Russia’s invasion of Ukraine in the first quarter of 2022.
Citi on Monday became the latest bank to predict that Brent prices could exceed $100 a barrel this year.
Saudi Arabia and Russia this month extended a combined 1.3 million barrels per day (bpd) of supply cuts to the end of the year.
These curbs could push the market into a 2 million bpd deficit in the fourth quarter and a subsequent drawdown in inventories could leave the market exposed to further price spikes in 2024, ANZ analysts said.
The question is whether the cuts will continue into next year, Callum Macpherson, head of commodities at Investec, said, “given the risk that higher prices must surely, at some point, stimulate US shale (oil output)”.
Either way, demand concerns remain. China, considered the engine of oil demand growth, is a key risk because of its sluggish post-pandemic economic recovery, though its oil imports have remained robust.
A series of stimulus measures and a summer travel boom helped industrial output and consumer spending to rebound last month and Chinese refineries ramped up output, driven by strong export margins.
“Lack of protracted (economic) progress, nonetheless, will be viewed as a major setback on the demand side,” said Tamas Varga of oil broker PVM.
“What’s striking is that this relentless oil price rally has taken place even amid concerns about lower demand from Europe and China as those economies grapple with a severe slowdown, which demonstrates just how tight the supply side of the equation has become,” said Marios Hadjikyriacos at broker XM.
Eyes will also be on central banks this week, including an interest rate decision from the U.S. Federal Reserve.
There is growing consensus that peak interest rates are not far away as inflationary pressure, in general, has been successfully mitigated, PVM’s Varga said.
“Investors, however, remain puzzled over when central banks will start cutting them,” he said. “The high-for-longer mantra would ultimately have a negative impact on economic growth and would affect oil demand.”
(Reporting by Natalie Grover in London and Florence Tan and Sudarshan Varadhan in Singapore; Editing by David Goodman)
Brent crude is a major trading classification of crude oil originating from the North Sea. It serves as a benchmark for oil prices globally and is used to price two-thirds of the world's oil.
Supply cuts refer to a reduction in the production of oil by major producers, such as OPEC countries. This is often done to stabilize or increase oil prices by reducing the amount of oil available in the market.
A supply deficit occurs when the demand for a commodity, such as oil, exceeds its available supply. This can lead to increased prices as buyers compete for limited resources.
West Texas Intermediate (WTI) crude is a grade of crude oil used as a benchmark in oil pricing. It is produced in the United States and is known for its high quality and low sulfur content.
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. Central banks attempt to limit inflation, and avoid deflation, to keep the economy running smoothly.
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