Oil prices continued their upward trajectory on Tuesday, marking the fourth consecutive session of gains. This surge in prices was driven by concerns over a supply deficit, largely attributed to diminishing shale output in the United States, coupled with extended production cuts by major oil-producing nations Saudi Arabia and Russia.Thank you for reading this post, don't forget to subscribe!
In the early hours of trading, U.S. West Texas Intermediate crude futures advanced by 99 cents, or 1.1%, reaching $92.47. Meanwhile, the global oil benchmark, Brent crude futures, saw an increase of 58 cents, equivalent to a 0.61% rise, pushing prices to $95.01 per barrel. This latest uptick in oil prices has resulted in both benchmarks achieving their highest levels in approximately 10 months.
The outlook for U.S. oil production from key shale-producing regions is becoming increasingly bearish, with projections indicating a decline to 9.393 million barrels per day (bpd) in October. This figure represents the lowest level recorded since May 2023 and marks the third consecutive month of output reduction. These developments follow the decision by Saudi Arabia and Russia to extend their combined supply cuts of 1.3 million bpd until the year’s end.
However, analysts from National Australia Bank have cautioned that the recent surge in oil prices has pushed the market into “overbought” territory, rendering it susceptible to a potential correction. They cited the potential for volatility following speeches by Saudi Aramco CEO Amin Nasser and Saudi Arabia’s energy minister on Monday as contributing factors to this vulnerability.
Aramco’s CEO, Amin Nasser, notably revised the company’s long-term demand outlook, forecasting global demand to reach 110 million bpd by 2030. This revision represents a decrease from the previous estimate of 125 million bpd. Additionally, Saudi Arabia’s Energy Minister, Prince Abdulaziz bin Salman, defended OPEC+ supply cuts, emphasizing the need for prudent regulation to curb market volatility. He also expressed concerns regarding uncertainties related to Chinese demand, European economic growth, and central bank actions aimed at addressing inflation.