Oil prices made a slight upward move on Monday, and the driving force behind this positive trend is the anticipation of a growing supply deficit in the upcoming fourth quarter. This optimism is rooted in recent actions taken by significant oil-producing nations, particularly Saudi Arabia and Russia, who have extended their production cuts. Additionally, there’s a growing sense of confidence in the recovery of demand in China, which happens to be the world’s foremost importer of crude oil.
Specifically, Brent crude futures saw a modest uptick of 5 cents, equivalent to 0.1%, reaching a price of $93.98 per barrel as of 0027 GMT. Simultaneously, U.S. West Texas Intermediate crude experienced a 15-cent increase, or 0.2%, reaching $90.92 per barrel.
Last week, China’s central bank took a strategic step by implementing a reserve ratio cut to inject liquidity and provide crucial support to its economy. This action, combined with China’s proactive stimulus policy, resilient economic data emerging from the United States, and the ongoing production cuts enforced by OPEC+, all contribute to the prevailing optimism in the oil market.
Related: Oil Prices Set to Extend Gains as Major Producers Commit to Output Cuts
Both Brent and WTI crude prices have been on an upward trajectory for three consecutive weeks, achieving their highest levels since November. The extension of supply cuts by Saudi Arabia and Russia, as part of the OPEC+ agreement, and the increased production by Chinese refineries driven by robust export margins are the primary drivers behind this positive trend.
It’s worth noting that these oil contracts are poised to register their most significant quarterly gains since the first quarter of 2022, when the market was impacted by Russia’s invasion of Ukraine.
Analysts are predicting that global oil demand growth will reach 2.1 million barrels per day (bpd), aligning with forecasts from the International Energy Agency and the Organization of the Petroleum Exporting Countries (OPEC).
Market watchers are keeping a close eye on the decisions of central banks this week, including the Federal Reserve’s stance on interest rates. Any hint of a pause in U.S. rate hikes could potentially weaken the dollar, which, in turn, would make dollar-denominated commodities like oil more accessible and affordable for holders of other currencies. This particular factor could exert further influence on oil prices in the near future.
