News

Published: September 13, 2023
Updated: September 13, 2023

Oil Prices Surge to Near 10-Month High as OPEC Remains Optimistic on Demand

In a surprising turn of events, oil prices experienced a significant 2% surge, propelling them to levels not seen in almost 10 months. This upward momentum is attributed to a more favourable supply outlook and OPEC's unwavering confidence in the resilience of energy demand within major economies.

Supply Outlook Boosts Oil Prices:

Brent futures exhibited an impressive rise of $1.64, equivalent to 1.8%, reaching $92.28 per barrel by 11:15 a.m. EDT (1515 GMT). Meanwhile, U.S. West Texas Intermediate (WTI) crude followed suit with a substantial increase of $1.91, or 2.2%, culminating at $89.20 per barrel. These remarkable gains marked both benchmarks as technically overbought for an astounding eighth consecutive day, setting them on a course for their highest settlements since November 2022.

OPEC's Positive Projections:

The Organization of the Petroleum Exporting Countries (OPEC) held steadfast to its optimistic forecasts regarding the global oil demand for 2023 and 2024. OPEC's monthly report affirms a predicted increase of 2.25 million barrels per day (bpd) in world oil demand for 2024. This confidence is rooted in the belief that major economies are displaying more robust growth than initially anticipated. As a result, this renewed faith in demand acted as a catalyst for the surge in oil prices.

Voluntary Supply Cuts and Unexpected Disruptions:

Contributing to the tightening of oil supplies, Saudi Arabia and Russia recently extended voluntary supply cuts by a combined 1.3 million bpd through the end of the year. Collectively known as OPEC+, this alliance has played a pivotal role in stabilizing oil markets. Furthermore, unforeseen disruptions such as Libya's closure of four eastern oil export terminals due to a deadly storm and maintenance work in Kazakhstan's Karachaganak gas condensate field have further compounded the supply situation.

Awaiting Key Data and Central Bank Decisions:

Oil traders are now eagerly awaiting the release of supply-demand forecasts from the U.S. Energy Information Administration's (EIA) Short Term Energy Outlook (STEO) and the International Energy Agency (IEA). Additionally, U.S. oil inventory data is set to be disclosed by the American Petroleum Institute (API) and the EIA. Analysts anticipate a draw of approximately 2.0 million barrels of crude from U.S. stockpiles for the week ending September 8, marking the fifth consecutive weekly draw—a streak not witnessed since January 2022.

Impact of Interest Rates and Inflation:

On the horizon, the release of the U.S.

consumer price index data for August holds significance as it could provide insights into the future of interest rates. While the Federal Reserve is widely expected to maintain its current rates at an upcoming policy meeting, there is a divergence of views on the possibility of a rate hike in November. It's essential to note that interest rate hikes can potentially dampen economic growth and subsequently reduce oil demand. The European Central Bank's interest rate decision, scheduled for Thursday, also looms as a pivotal factor.

The recent surge in oil prices to near 10-month highs reflects a combination of factors, including supply constraints, OPEC's unwavering confidence in demand, and unexpected disruptions. As markets eagerly await key data releases and central bank decisions, the oil industry remains in a dynamic state, poised for continued volatility in the near term.