Crude Oil Prices Surge to 10-Month High Amid Supply Cuts and OPEC Optimism
Crude oil prices have reached a 10-month high, exceeding $90 per barrel, primarily due to the joint efforts of major oil producers Saudi Arabia and Russia. These two nations have extended their voluntary oil supply cuts until the end of the year. This move has significantly impacted the oil market, leading to a surge in prices.
Also read: Oil jumps 2% to near 10-month high as OPEC predicts tight supplies
OPEC Expresses Confidence Despite Rising Interest Rates
The Organization of the Petroleum Exporting Countries (OPEC) has expressed optimism about the global economy, even in the face of increasing interest rates. This positive sentiment has further boosted confidence in the oil market and contributed to the upward trajectory of crude oil prices.
Image Credit: The Economic Times
Brent Crude and West Texas Intermediate on the Rise
On September 12, crude oil prices witnessed a notable increase of around 1%. Brent crude futures for November rose by 0.9% to reach $91.49 per barrel, while US West Texas Intermediate crude futures for October recorded a 1.2% increase, reaching $88.31 per barrel. These gains reflect the growing market optimism.
Brent crude achieved a significant milestone by surpassing the $90 per barrel mark, a level not seen in a decade. This milestone was reached following OPEC’s announcement of combined supply cuts totaling 1.3 million barrels per day (mbpd) until the end of 2023. The market response to this announcement was swift and impactful.
OPEC’s Latest Oil Market Report
OPEC’s September monthly oil market report revealed key insights. It revised down the global oil demand for 2023 by 100,000 barrels per day, bringing it to 29.2 million barrels per day, which still represents an 800,000 barrels per day increase compared to 2022. Additionally, OPEC adjusted the 2024 demand outlook downward by 100,000 barrels per day to 30 million barrels per day.
The oil market is currently grappling with a supply shortfall of over 3 million barrels per day in the next quarter. This shortfall could be the most significant deficit in over a decade. It is primarily attributed to Saudi Arabia’s prolonged output cuts, which are occurring alongside a period of record demand. This supply-demand dynamics has propelled oil prices above $90 per barrel.
Future Oil Demand Outlook
OPEC’s monthly report predicts a 2.25 million barrels per day increase in global oil demand in 2024, compared to a growth of 2.44 million barrels per day in 2023. These forecasts have remained unchanged since the previous month. The surge in oil futures, approximately 25% since late June, is driven by surging fuel demand and the strategic supply constraints imposed by Saudi Arabia and Russia to enhance their revenues.
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Technical Analysis by Religare Broking
According to Religare Broking, a domestic brokerage firm, there are neutral sentiments regarding MCX Crude Oil. Their technical analysis highlights a MACD bullish divergence signaling an uptrend. However, for prices to continue their upward trajectory, they must break above the 7,320 region. Any dip below 7,130 may introduce weakness. Religare has identified technical levels ranging from ₹6,800 to ₹7,680, with a potential turnaround point at ₹7,130.
In conclusion, the recent surge in crude oil prices is driven by the coordinated supply cuts by Saudi Arabia and Russia, as well as OPEC’s positive outlook on global demand. This development has led to Brent crude exceeding $90 per barrel, with significant implications for the oil market in the coming months.
