Oil prices continued their upward trajectory for a third consecutive session of gains on Monday.
The surge was driven by a series of factors, including predictions of an expanding supply deficit in the fourth quarter.
The extension of production cuts by oil giants Saudi Arabia and Russia, along with growing optimism regarding increased demand in China, played significant roles in boosting the market sentiment.
In the early hours of trading, Brent crude oil, against which Nigerian oil is priced, surged by 71 cents, or 0.8% to $94.64 per barrel while the U.S. West Texas Intermediate crude oil climbed to $91.55 per barrel, up by 78 cents or 0.9%.
Tina Teng, an analyst at CMC Markets, commented on the bullish factors driving the oil market’s upward momentum, she said, “China’s stimulus policy, resilient U.S. economic data, and OPEC+’s ongoing output cuts are the bullish factors that support the oil market’s upside movement.”
Teng also pointed to China’s central bank’s recent reserve ratio cut, designed to enhance liquidity and support its economy, as a contributing factor.
As the week unfolds, market participants will closely monitor decisions and commentary from central banks, including the U.S. Federal Reserve, regarding interest rate policies. Also, attention will be directed towards key economic data releases from China.
Brent and West Texas Intermediate (WTI) crude prices have notched up gains for three consecutive weeks, reaching their highest levels since November. These impressive climbs put them on course for their most substantial quarterly increase since the first quarter of 2022, coinciding with Russia’s invasion of Ukraine.
ANZ analysts highlighted the potential consequences of the Saudi and Russian output cuts. These cuts, if maintained, could lead to a deficit of up to 2 million barrels per day (bpd) in the fourth quarter. Such a scenario could result in further drawdowns in inventories, leaving the market susceptible to additional price spikes in 2024.
Saudi Arabia and Russia have chosen to extend their supply cuts until the end of the year as part of the OPEC+ group’s coordinated strategy. Concurrently, Chinese refineries have increased production levels, driven by robust export margins.
Edward Moya, an analyst at OANDA, speculated about the future trajectory of oil prices, stating, “It seems like prices will easily find a home above the $90 a barrel level, which means the focus might shift to the demand outlook from the world’s two largest economies.”
ANZ predicts that global oil demand growth is poised to reach 2.1 million bpd, aligning with forecasts from the International Energy Agency and the Organization of the Petroleum Exporting Countries (OPEC).
