International oil benchmarks Brent and WTI are each at present buying and selling above $90 per barrel hitting 10-month highs on tighter provide expectations and improved market fundamentals. The query on each crude market commentators’ thoughts is whether or not a return to $100 oil costs is imminent?
At 10:49am EDT on Friday (September 15, 2023), the Brent entrance month futures contract was up $0.088 or 0.09% to 93.78 per barrel, having briefly risen above $94, whereas the WTI was at $90.72 per barrel, up $0.56 or 0.62%.
Intraday ranges on Friday observe every week of strengthening costs and are a marked distinction from the largely rangebound activity seen in August. After a number of weeks of oil costs oscillating round mid-$80 ranges final month and trying to find a get away both manner, bullishness returned in September as Saudi Arabia and Russia prolonged their mixed oil manufacturing cuts of 1.3 million barrels per day (bpd) to the tip of the 12 months.
It prompted the International Energy Agency and different observers to foretell a big provide deficit for the fourth quarter of 2023. The company expects international demand to be within the area of two.2 million bpd in 2023 adopted by a pointy decline to a progress price of 1 million bpd in 2024.
However the Group Of Petroleum Exporting International locations (OPEC) has provided much higher demand growth estimates of two.44 million bpd and a couple of.25 million bpd for 2023 and 2024 respectively.
A lot of the market sentiment final month was leaning in favour of rising crude provides from Brazil, Guyana, Iran and the U.S. largely offsetting manufacturing cuts Saudi Arabia and Russia to fulfill current demand, at a time of wider macroeconomic uncertainty, larger rates of interest and the lukewarm efficiency of China’s economic system.
Nonetheless, the rollover of Saudi-Russian cuts until the tip of 2023 has materially altered market sentiment within the face of rising distillate demand, particularly that of gasoline, diesel and jet gasoline, because the Northern Hemisphere’s winter approaches.
So is crude oil heading in direction of $100 barring an enormous deterioration in financial information? The fast and quick reply is sure, particularly for Brent, deemed to be the worldwide proxy benchmark within the eyes of many.
Nonetheless, on present buying and selling volumes each Brent and WTI seem like overbought, i.e. buying and selling at ranges above what many imagine to be their truthful worth. Due to this fact a market correction is probably going, however not earlier than Brent on the very least caps the $100 per barrel mark.
Moreover, the Saudi-Russian manufacturing cuts are unlikely to overspill into 2024. It’s why costs for Brent futures contracts 6 months (out and past) are at $90 and decrease for the time being, or in backwardation, a place whereby the present worth is larger than costs buying and selling within the futures market additional down the street.
So whereas larger costs – together with a return to $100 per barrel ranges for Brent for the primary time since Jul 2022 – could also be doubtless, do not guess on them staying there in 2024.