Oil futures marked fresh highs for the year on Monday, after posting a third consecutive weekly climb on continued concerns over tightening crude supplies.
Price action
-
West Texas Intermediate crude
CL00,
+0.75%
for October delivery
CL.1,
+1.07% CLV23,
+1.07%
rose 71 cents, or 0.8%, to settle at $91.48 a barrel on the New York Mercantile Exchange, the highest front-month contract finish since Nov. 7, according to Dow Jones Market Data. -
November Brent crude
BRN00,
+0.46% BRNX23,
+0.46% ,
the global benchmark, climbed 50 cents, or 0.5%, at $94.43 a barrel on ICE Futures Europe, the highest since Nov. 11. -
October gasoline
RBV23,
-0.19%
shed 0.4% to $2.70 a gallon, while October heating oil
HOV23,
+0.46%
declined 2.8% to $3.29 a gallon. -
October natural gas
NGV23,
+0.04%
climbed 3.2% to $2.73 per million British thermal units.
Market drivers
Oil has “maintained its momentum thanks to the existence of some potential green shoots among the Chinese macroeconomic indicators,” said Tim Waterer, chief market analyst at KCM Trade. That data included an improvement in China’s industrial production and consumption last month and 4.6% year-on-year growth in retail sales in August.
The WTI contract is “attempting to make a home above the $90 per barrel level,” said Waterer, in emailed commentary.
“The technical indicators are starting to look a little stretched,” he said. “Nonetheless, supply-side cuts should limit any downside moves for the time being in the oil market.”
WTI rose 3.7% last week, while Brent advanced 3.6%; both grades ended Friday at their highest since November. Crude has been on a tear since summer, recovering from an early 2023 selloff as expectations for tight second-half supplies overshadowed worries over the economic recovery in China, the world’s second-biggest oil consumer.
Read: Consumers take notice as inflation bites and oil prices top $90 a barrel
A decision by Saudi Arabia to cut production by 1 million barrels a day beginning in July has played a major role in pushing crude higher. The cut was recently extended through the end of the year, while Russia has also moved to curb supplies by 300,000 barrels a day over the same stretch.
“What’s striking is that this relentless oil price rally has taken place even amid concerns about lower demand from Europe and China as those economies grapple with a severe slowdown, which demonstrates just how tight the supply side of the equation has become,” Marios Hadjikyriacos, lead investment analyst at XM, said in a note.
“The fact that oil rallied on Friday despite the risk-off tone in equity markets adds credence to this notion,” he wrote.
Still, some oil producers might look to capitalize on the rise in oil prices to fresh highs for the year.
“Taming the current bullishness will likely rest on non-OPEC production — especially U.S. shale — showing a stronger response to higher prices and lifting global supply,” said Robbie Fraser, manager, global research & analytics at Schneider Electric, in a daily note. “There are early signs of that occurring, but it will need to be stronger and more consistent to reverse course.”
Read: Janet Yellen says she expects soaring oil prices to stabilize
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