Oil hits 2023 highs on tight supply outlook
REUTERS - Oil prices climbed yesterday to their highest this year, as expectations of tighter supply outweighed worries about weaker economic growth and rising U.S. crude inventories.
Brent crude was up US$ 1.74, or 1.88 percent, at US$ 93.62 by 11:24 a.m. ET (1524 GMT). The session high of US$ 93.68 was its highest since November 2022.
U.S. West Texas Intermediate crude (WTI) gained US$ 1.57, or 1.8 percent, to US$ 89.09. It also hit a 10-month high of US$ 90.26. On Wednesday, the International Energy Agency said Saudi Arabia and Russia have extended oil output cuts, which will result in a market deficit through the fourth quarter. Prices briefly pulled back on a bearish U.S. inventories report before resuming their climb.
“That this genuinely bearish stock report only led to a brief temptation to sell speaks volumes and underlines the market mentality,” said Tamas Varga of oil broker PVM.
Both benchmarks had slipped on Wednesday after a U.S. supply report showing rising crude and refined product stocks.
Hedge funds have been buying crude oil futures for the past two or three weeks as “fundamentals continue to get stronger, driven mostly by heavy demand for both gasoline and diesel,” said Dennis Kissler, senior vice president of trading at BOK Financial.
Both benchmarks remained in technically overbought territory.
A day before the IEA report, the Organization of the Petroleum Exporting Countries (OPEC) issued updated forecasts of solid demand and also pointed to a 2023 supply deficit if production cuts are maintained.
The European Central Bank raised its key interest rate to a record peak but signalled this was likely its final move to tame inflation.
U.S. retail sales rose by 0.6 percent on the month in August driven by higher gasoline prices, above a 0.2 percent rise forecasted by Reuters-surveyed analysts. Jobless claims in the week to Sept 9 meanwhile rose by 3,000 to 220,000, but fell short of economists’ 225,000 forecast.
Investors nonetheless see a 97 percent likelihood the Federal Reserve will hold interest rates steady in its next meeting on Sept. 20, according to the CME FedWatch Tool.