Oil prices extended 10-month highs on Wednesday, driven by expectations that crude supply will remain tight for the rest of the year.
Saudi Arabia and Russia’s extension of 1.3 million barrels per day (bpd) of crude oil production cuts to the end of this year will lock in a substantial market deficit through the fourth quarter, the International Energy Agency (IEA) said on Wednesday.
The continuing supply cuts could lift Brent futures above the $100 a barrel threshold before the end of the year, Bank of America analysts said on Wednesday.
Benchmark Brent futures rose 57 cents, or 0.62%, to $92.63 a barrel by 1006 GMT while U.S. West Texas Intermediate (WTI) crude gained 57 cents, or 0.64%, to $89.41.
Front-month Brent futures contracts traded as high as $4.68 a barrel above those for delivery six months further out on Tuesday, a width of spread not breached since last November, indicating tighter market supply.
Concern over European and U.S. economies persist, however, and investors await the release of U.S. consumer price index data later on Wednesday for possible insight on future interest rate moves.
Forecasters expect the European Central Bank to raise interest rates at its meeting on Thursday.
The IEA’s fourth-quarter demand growth forecast, meanwhile, was revised down by 600,000 bpd in what Investec analyst Callum Macpherson said was a significant adjustment.
“The deficit is now broadly equal to the Saudi additional voluntary cut,” he said.
The Organization of the Petroleum Exporting Countries (OPEC) on Tuesday stuck to its forecasts for robust growth in global oil demand in 2023 and 2024.
Four oil ports shut in by powerful storms in Libya reopened on Wednesday.