Oil Markets Brace for Potential Resumption of Rally Amid Tightening Supplies

Oil markets are maintaining their steady course as hedge funds double down on their bets that tightening supplies will reignite the recent rally, despite a slight pause last week.

West Texas Intermediate (WTI) gained 0.7% before settling just above the $90-per-barrel price level following the surge in hedge funds’ bullish positions on WTI, the highest since February 2022.

Brent crude oil, against which Nigerian crude oil is priced, appreciated by 0.53% to $93.76 per barrel.

JPMorgan Chase & Co. is also chiming in, joining the chorus of voices predicting an “oil supercycle.” Oil has surged by over 25% since the end of June, poised for its most substantial quarterly gain since March 2022. This robust performance is credited to supply restrictions implemented by OPEC+ heavyweights Saudi Arabia and Russia, alongside brighter economic prospects in the US and China.

The market buzz is now dominated by discussions of the elusive $100-a-barrel crude, which could have ripple effects, increasing pressure on importing nations.

Analyst Zhou Mi from the Chaos Research Institute in Shanghai remains optimistic, emphasizing Saudi Arabia’s ongoing output cuts and solid demand from both China and the US.

Meanwhile, the physical market echoes these sentiments. Russia’s recent ban on diesel and gasoline exports has already elevated fuel prices, while US crude stockpiles continue to dwindle. The oil market’s backwardated structure further underscores strong competition for immediate supplies.

China is also gearing up for its Golden Week holiday, which is expected to boost jet fuel demand in the world’s largest oil-importing nation. With over 21 million people anticipated to take to the skies during this extended break, the momentum in the air travel sector appears to be continuing.

Saudi Arabia’s Foreign Minister, Faisal bin Farhan, highlighted the role of OPEC and its allies in stabilizing energy markets, underscoring their commitment to ensuring market equilibrium during a recent United Nations speech.

As the world watches these market dynamics unfold, the future of oil prices remains uncertain but decidedly intriguing.