Oil investors and traders are closely monitoring the recent surge in oil prices, which has inched closer to the $100 per barrel mark. Interestingly, certain grades of crude oil have already surpassed this significant milestone, underscoring concerns about a tightening supply. Notably, the price of Nigerian crude, Qua Iboe, exceeded $100 a barrel, according to data from LSEG. Additionally, Malaysian crude, Tapis, reached $101.30 last week, as reported by Bjarne Schieldrop, an analyst at Swedish bank SEB.Thank you for reading this post, don't forget to subscribe!
The oil market has witnessed its highest levels in 2023, with investors increasingly focused on the possibility of a supply deficit in the fourth quarter. This situation arises following the decision by major oil-producing nations, Saudi Arabia and Russia, to extend supply cuts. These two nations, being the largest contributors to the OPEC+ group, have prompted other members to follow suit by reducing their output. According to Schieldrop, Saudi Arabia and Russia wield substantial control over the oil market, setting the tone for these developments.
Brent oil futures, serving as a global benchmark, traded as high as $94.89 on Monday, while the related benchmark for trading the majority of the world’s physical oil cargoes, known as dated Brent, stood slightly above $96, according to LSEG data.
Certain crudes, such as Qua Iboe, have already breached the $100 threshold because they are pegged to the price of dated Brent, along with an added cash differential or premium, which is presently assessed at approximately $4.25 per barrel by LSEG. Schieldrop predicts that dated Brent is highly likely to surpass $100 soon, suggesting that even a small amount of market volatility could push it over this mark. Swiss bank UBS shares this sentiment, envisioning a future where Brent futures reach triple digits. UBS analyst Giovanni Staunovo has expressed the expectation that Brent will trade within a range of $90–100 over the coming months, with a year-end target of $95.