Oil prices rose on Wednesday, September 13, hitting a 10-month high, as a surprise build in US crude inventories did not dampen expectations of tight crude supply for the rest of the year.
International benchmark Brent futures rose 39 cents to $92.45 a barrel. Its session high of $92.84 a barrel was the highest since November. US West Texas Intermediate (WTI) crude gained 45 cents to $89.29. Its session high of $89.64 a barrel was also the highest since November.
Front-month Brent futures contracts traded as high as $4.90 a barrel above those for delivery six months further out, the widest spread since November, indicating tightening supply, according to news agency Reuters.
Back home, on the Multi Commodity Exchange (MCX), crude oil futures due for a September 19 expiry, were last trading lower by 0.32 per cent at ₹7,361 per bbl, having swung between ₹7,332 and ₹7,431 per bbl during the session so far, against a previous close of ₹7,385 per barrel.
What’s fueling the rally in crude prices?
-Prices gained despite government data that showed US crude stocks, petrol and distillate inventories rose last week. US crude inventories rose by 4 million barrels in the last week to 420.6 million barrels.
-Global oil markets face a supply shortfall of more than 3 mbpd in the next quarter — potentially the biggest deficit in more than a decade — as a result of Saudi Arabia’s extended output cuts, according to the monthly oil report by the Organisation of Petroleum Exporting Countries (OPEC).
-The latest data published by OPEC shows why the kingdom’s supply squeeze, amid a period of record demand, has sent oil prices surging beyond $90 a barrel. Oil futures have rallied by roughly 25 per cent since late June as fuel demand soars, while Saudi Arabia and Russia constrict supplies to boost their revenues.
Where is Brent headed?
-The continuing supply cuts could lift Brent futures above the $100 a barrel threshold before the end of the year, according to analysts at Bank of America.
-Kotak Securities, in its recent report said that sustained efforts by the OPEC+ alliance, and particularly Saudi Arabia, to cut production are finally bearing fruit. After four quarters of declines, oil prices have moved up to $90/bbl in recent weeks.
‘’With Saudi Arabia and Russia extending their additional voluntary cuts to end-2023, oil prices are likely to remain firm and could move up further…‘’Our Brent oil price assumption of $85/90/80 per barrel in FY2024/25/LT is unchanged,” said Kotak.
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Updated: 13 Sep 2023, 10:23 PM IST