The price of oil futures continued to rise on Wednesday, reaching their highest point in 2023. The increase in price can be attributed to growing concerns over tight supplies in the market.
- West Texas Intermediate crude for October delivery (CL00, +0.47% CLV23, +0.47%) saw a rise of 0.7%, or 60 cents, bringing it to $89.44 per barrel on the New York Mercantile Exchange.
- November Brent (BRN00, +0.45% BRNX23, +0.45%) also experienced a 0.7% increase, with a gain of 60 cents, reaching $92.66 per barrel on ICE Futures Europe.
According to the International Energy Agency (IEA) based in Paris, cuts made by Saudi Arabia and other members of the Organization of the Petroleum Exporting Countries (OPEC) have led to a reduction of 2.5 million barrels per day since January. However, this decrease has been counterbalanced by the record-breaking supply from the United States and Brazil. Non-OPEC supply has increased by 1.9 million barrels per day.
Nevertheless, the joint decision by Saudi Arabia and Russia to cut supplies by a total of 1.3 million barrels per day until the end of the year is expected to result in a deficit of approximately 1.1 million barrels per day in the fourth quarter of this year, as reported by the IEA.
The release of the IEA report follows OPEC's monthly update on Tuesday, in which forecasts for supply growth in both 2023 and 2024 remained unchanged.
Oil Market Outlook: Staying Strong Amidst Recession Risks
The global oil market has been able to maintain its upward trajectory, despite the looming recession risks. Analysts at Sevens Report Research have highlighted the absence of significant downward revisions to global oil demand over the next two years as a key factor behind this resilience. However, with futures reaching overbought territory on the daily time frame charts, a profit-taking pullback may be on the horizon in an otherwise bullish energy market.
Potential Catalysts for a Pullback
According to the experts at Sevens Report Research, a hot consumer-price index reading or a bearish weekly supply report from the Energy Information Administration could trigger a pullback in the oil market. These factors have the potential to influence investors' sentiment and prompt profit-taking activities.
The American Petroleum Institute revealed that crude inventories had increased by 1.2 million barrels last week, according to a trusted source. However, analysts surveyed by S&P Global Commodity Insights hold a different outlook. On average, they anticipate that the Energy Information Administration's report will show a decrease of 1 million barrels in US crude supplies, while gasoline stocks are projected to fall by 1.4 million barrels. Distillate inventories, on the other hand, are expected to remain unchanged.
Stay tuned for the latest updates in the oil market as it continues on its upward trajectory with a watchful eye on potential pullbacks.
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