U.S. West Texas Intermediate (WTI) crude futures climbed by 23 cents, or 0.3%, reaching $91.02 per barrel. This recovery followed a 92-cent loss on the previous Friday. Both benchmarks enjoyed a substantial nearly 30% rally during the third quarter, primarily driven by forecasts of a significant crude supply deficit in the fourth quarter. This projection stems from Saudi Arabia and Russia extending additional supply cuts until year-end.
OPEC+ Policy Unchanged: The Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia (OPEC+), are expected to maintain their current oil output policy. Four sources within OPEC+ informed Reuters about this expectation. The prevailing tighter supplies and rising demand are contributing to the ongoing oil price rally.
Factors Driving Prices: Hiroyuki Kikukawa, President of NS Trading, cited supply concerns and the avoidance of a U.S. government shutdown as factors contributing to the recent strength in oil prices. The last-minute bipartisan agreement to pass a short-term funding bill delayed the risk of a government shutdown until mid-November, providing relief to over 4 million federal workers.
Supply Worries Intensify: The U.S. oil and gas rig count, seen as an early indicator of future output, declined by seven to 623 in the week ending September 29. This marks the lowest count since February 2022, as reported by energy services firm Baker Hughes.
Price Outlook and Caution: According to a Reuters survey of 42 economists, Brent crude is expected to average $89.85 per barrel in the fourth quarter and $86.45 in 2024. However, investor caution prevails due to concerns about the Chinese economy. A private-sector survey revealed that China’s factory activity expanded at a slower pace in September, primarily due to sluggish external demand. Despite some signs of stabilization, challenges such as a property market slump, falling exports, and high youth unemployment continue to cloud the economic outlook, raising uncertainties about future fuel demand.
As oil prices respond to evolving supply dynamics and global economic conditions, market participants remain watchful for further developments in the coming months.
