Oil traded near a 10-month high as influential forecasts increasingly signal tight markets for the remainder of the year.
(Bloomberg) — Oil traded near a 10-month high as influential forecasts increasingly signal tight markets for the remainder of the year.
West Texas Intermediate held above $89 a barrel after climbing on Wednesday to the highest intra-day level since mid-November amid a slew of reports from top analysts. The International Energy Agency predicts a “significant supply shortfall” in coming months and OPEC estimates the deficit could be the biggest in over a decade. The US government also expects that global consumption will exceed production.
Prices are approaching $90 a barrel after soaring roughly 30% since late June, as demand in the US and China — the top two consumers — remains robust while OPEC+ leaders Saudi Arabia and Russia constrict supplies.
“Heading into the fourth quarter, the market looks a lot tighter,” Ben Cahill, senior fellow at the Center for Strategic International Studies, told Bloomberg television. “The supply cuts from OPEC+ are starting to bite and it looks like we’re heading for a pretty significant supply deficit — so that does mean it’s bullish for prices.”
Spreads between monthly WTI futures are showing a premium for near-term contracts, a condition known as backwardation that typically symbolizes scarce availability of barrels.
Crude has tracked gains in broader equity markets, while a gauge of the dollar has edged lower, making commodities priced in the currency more attractive for many buyers.
Countering the bullish narrative was some US government data released on Wednesday, showing the nation’s crude inventories rose for the first time in five weeks amid the highest imports since 2019. Inventories at the key storage hub in Cushing, Oklahoma declined.
“It may take more than a single data point to overturn the tight-supplies narrative,” said Yeap Jun Rong, market strategist at IG Asia Pte, referring to the higher US stockpile levels. “For now, technical conditions are heading into near-term overbought territory,” risking a possible pullback in prices, he said.
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