Oil prices continued their rally Monday, propelled by a combination of factors, including expectations of a growing supply shortfall in the last quarter of 2023 and better Chinese demand.
West Texas Intermediate (WTI) for October contract, which will expire Wednesday, edged up 0.9%, or 78 cents, to $91.6 per barrel at 10:33 am GST Monday, while Brent Crude for November settlement expiring next Friday rose 0.7%, or 69 cents, to $94.6 a barrel around the same time.
WTI and Brent have surged for three straight weeks, with both benchmarks closing with marginal gains of 0.7% and 0.3%, respectively, last Friday. At current levels, WTI and Brent are poised for their largest quarterly gains since the first quarter of 2022.
“China’s stimulus policy, resilient US economic data, and OPEC+’s ongoing output cuts are the bullish factors that support the oil market’s upside movement,” Tina Teng, analyst at CMC Markets, told Reuters.
Teng referred to China’s central bank’s move last week to slash the reserve requirement ratio (RRR) to 7.4%, a benchmark ratio for the amount of cash banks must hold in reserve to improve liquidity and sustain economic recovery.
Supply deficit Meanwhile, the oil rally in recent weeks has been persistently aided by a series of production cut announcements by Saudi Arabia and Russia, as industry bodies and analysts predict this supply curtailment will cause a widened deficit through the end of the year.
According to the International Energy Agency’s (IEA) latest monthly report, world oil demand that is estimated to rise by 1.5 million barrels per day (bpd) in the second half of the year compared to the first half will surpass supply by 1.24 million bpd...
Output cut by members of the expanded grouping of the Organization of the Petroleum Exporting Countries (OPEC), called OPEC+, has totaled 2.5 million bpd since the beginning of the year, said IEA, adding that these cuts have so far offset by higher supplies from non-OPEC+ oil producers.
