Oil crept higher toward $95 a barrel, extending a powerful surge that has been driven by bumper demand and supply cuts from OPEC+ leaders Saudi Arabia and Russia.
Global benchmark Brent added 0.3%, after a three-week rally that boosted prices by 11%. The gains have in recent days been accompanied by a jump in key timespreads that suggest the market is undersupplied, while bullish call options are also getting more expensive.
Crude in London is up almost 10% this year as the OPEC+ linchpins curb production and the demand outlook brightens, with the US potentially avoiding recession just as refiners in China go all-out. Against that backdrop, crude stockpiles have dropped, while speculators boosted net-bullish wagers on Brent and US benchmark West Texas Intermediate to a combined 15-month high.
Oil’s surge looks set to fan inflationary pressures around the globe just as central bankers, including those at the US Federal Reserve, try to determine whether they have already done enough to beat back the pace of price gains by hiking interest rates. It’ll be an important week for monetary policy, with decisions due from the Fed and the Bank of England, among others.
“We have long argued that the oil market would be increasingly tight in the second half of 2023,” said Arne Lohmann Rasmussen, head of research at A/S Global Risk Management. “That tightening has now arrived, and it only seems a matter of time before we see a test of $100 a barrel.”
With Saudi Arabia and Russia prolonging supply curbs to year-end, Saudi Energy Minister Abdulaziz bin Salman Al Saud is set to be among keynote speakers at the World Petroleum Congress in Calgary later on Monday.
In the physical market, refined products like diesel are increasingly flashing warning signs, with the world’s refineries proving powerless to make enough of the industrial fuel. Prices have far outstripped those for crude.
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