Oil prices continued to climb for the fourth consecutive session on Tuesday, driven by concerns over a supply deficit caused by extended production cuts from Saudi Arabia and Russia, as well as weak shale output in the United States.
U.S. West Texas Intermediate crude futures rose 98 cents to $92.46 a barrel, while global oil benchmark Brent crude futures increased by 46 cents to $94.89 a barrel. Both benchmarks are now at their highest levels in 10 months.
The U.S. Energy Information Administration (EIA) reported that U.S. oil output from top shale-producing regions is on track to reach its lowest level since May 2023 in October. It is expected to have fallen for three consecutive months.
Saudi Arabia and Russia recently extended their combined supply cuts of 1.3 million barrels per day until the end of the year, adding to concerns about supply tightness. Technical factors and worries over supply constraints are also supporting the upward trend.
Analysts at National Australia Bank cautioned that the market could be vulnerable to a correction, as oil prices have entered into overbought territory. They pointed to potential volatility following speeches from Saudi Aramco CEO Amin Nasser and Saudi Arabia’s Energy Minister, who discussed uncertainties surrounding Chinese demand, European growth, and central bank measures to tackle inflation.
Aramco CEO Nasser revised down the company’s long-term demand forecast from 125 million barrels per day to 110 million barrels per day by 2030, emphasizing the need for light-handed regulation to limit market volatility.
Overall, the combination of extended production cuts, weak shale output, and concerns about future demand have contributed to the recent upward trajectory of oil prices.
Sources: Stephanie Kelly – Thomson Reuters, Andrew Hayley – Thomson Reuters