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Oil prices reached their highest point in ten months as supply reductions by OPEC+ leaders intensified tightness in the physical market. The global benchmark, Brent, surged past $95 per barrel, marking its first appearance above this level since November and extending its four-day streak of gains. Refiners are grappling with soaring premiums for physical oil barrels as they struggle to meet the rising demand for diesel ahead of the seasonal uptick.
This tightening market has led industry experts like Chevron Corp.’s CEO, Mike Wirth, to anticipate the return of $100 per barrel oil. Crude oil has witnessed an impressive rally, climbing by over 30% since mid-June, primarily due to export reductions by Saudi Arabia and Russia. These measures aimed to deplete inventories and facilitate a recovery in oil prices. Additionally, positive economic outlooks in the world’s two largest economies, the United States and China, have contributed to the upward trajectory of oil prices. However, this surge in energy costs is poised to elevate inflationary pressures, adding complexity to the challenges faced by central banks.
Charu Chanana, a market strategist at Saxo Capital Markets Pte., commented, “The risks of a short-term spike to $100 may be increasing with the current momentum, but we have little confidence that it would be sustainable. Higher inflation could lead to tighter monetary policies, and OPEC+ may find it challenging to control demand.”
Saudi Arabia’s Energy Minister, Prince Abdulaziz bin Salman, affirmed on Monday that the Organization of Petroleum Exporting Countries (OPEC) is committed to maintaining stability in oil markets and enhancing global energy security. He emphasized that OPEC’s focus is not fixed on any specific price level and stated that output plans will undergo monthly reviews.
Key market indicators underline the immediate tightness. Brent’s three-month spread has expanded to $3.85 per barrel in a backwardation pattern, which is bullish. This stands in contrast to a differential of $1.26 per barrel just a month ago.
