By Adedapo Adesanya
Brent crude futures climbed by $1.82 or 1.98 per cent to $93.70 per barrel on Thursday, the highest level this year, as expectations of tighter supply outweighed worries about weaker economic growth.
Also, the US West Texas Intermediate (WTI) crude gained $1.64 or 1.85 per cent during the trading session to close at $90.16 per barrel, the highest for the first time since last November.
The International Energy Agency said Saudi Arabia and Russia’s extended oil output cuts would result in a market deficit through the fourth quarter.
Prices had previously pulled back on a bearish US inventories report before resuming their climb.
The Organisation of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, began limiting supplies in 2022 to bolster the market.
Earlier this month, benchmark Brent crude breached $90 a barrel for the first time this year after OPEC+ leaders Saudi Arabia and Russia extended their combined 1.3 million barrel per day cuts until the end of 2023.
Output curbs by OPEC+ members of more than 2.5 million barrels per day since the start of 2023 have so far been offset by higher supplies from producers outside the alliance, including the United States, Brazil and still under sanctions, Iran, the agency said.
“But from September onwards, the loss of OPEC+ production… will drive a significant supply shortfall through the fourth quarter,” it said in its monthly oil report.
However, the lack of cuts at the start of next year would shift the balance to a surplus, the agency said, highlighting that stocks will be at uncomfortably low levels, increasing the risk of another surge in volatility in a fragile economic environment.
Prior to the IEA report, OPEC issued updated forecasts of solid demand and also pointed to a 2023 supply deficit if production cuts are maintained.
Market analysts warned that the move by Saudi Arabia and Russia could constrain supplies as the market approaches the peak northern hemisphere demand season for the winter period.
The European Central Bank (ECB) raised its key interest rate to a record peak but signalled this was likely its final move to tame inflation.
At the meeting on Thursday, it announced a 25-basis-point increase, and this pushed the rate the ECB pays on bank deposits to 4.0 per cent, the highest level since the Euro currency was launched in 1999.
Meanwhile, the central bank in China, the world’s second-largest oil consumer, said it would cut the amount of cash that banks must hold as reserves for the second time this year to boost liquidity and support the country’s economic recovery.
China’s economic recovery has remained choppy, worrying markets about demand.
