Oil rebounds as markets refocus on supply tightness. Oil prices rose on Thursday after dipping the day before as markets returned to a tighter oil supply picture for 2023, with demand expected to remain strong.
Brent oil futures increased 54 cents, or 0.6%, to $92.42 a barrel at 0630 GMT, while WTI jumped 54 cents to $89.06.
Phillip Nova senior market analyst Priyanka Sachdeva said producers “adamantly stick to restricted production,” and oil prices are based on supply fears.
On Wednesday, the International Energy Agency (IEA) maintained its demand growth forecasts for this year and next. It warned that Saudi Arabia and Russia’s extension of oil production restrictions until 2023 would cause a major market gap in the fourth quarter.
The agency predicted the balance would flip to a surplus in 2024 without cutbacks, but stockpiles would be uncomfortably low.
On Tuesday, OPEC maintained its prediction for strong global oil demand growth in 2023 and 2024.
“The oil market looks decidedly tight over the next two to three quarters as supply constraints persist amid robust demand,” said ANZ Research analysts.
“We expect ongoing geopolitical risks and the uncertain economic backdrop to lead Saudi Arabia to maintain these production cuts into Q1 2024,” they said.
Both benchmarks reached 10-month highs on Wednesday until a surprising boost in U.S. oil and gasoline stocks spooked markets about demand.
A Reuters poll predicted a 1.9 million-barrel reduction, but U.S. oil stocks surged 4 million barrels last week. Fuel inventories increased more than predicted as refiners increased operations.
The latest U.S. inflation report supported the Federal Reserve’s decision not to hike interest rates next week and may prolong its pause.
Higher rates would raise corporate and consumer borrowing costs, slowing economic development and reducing oil demand. Thus, further pauses would benefit the oil market.
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