Crude oil price at 10-month high. Now what’s next?
Crude oil prices clocked at a ten-month high last week, driven by worries about supply shortages after an unexpected extension of voluntary supply cuts by Saudi Arabia and Russia. Hopes of a delay in further rate hikes by the US Federal Reserve and positive fuel demand from China aided the demand outlook.
The most active US WTI crude tested $88 a barrel level, while the Asian benchmark Brent crude pushed above $90 a barrel, for the first time since November last year. A similar move was witnessed in the domestic futures market as well.
In April, the key oil-producing countries including Russia, commonly known as OPEC Plus, announced a combined production cut, proposed to extend till 2024 aimed at supporting market stability. However, Saudi Arabia and Russia voluntarily introduced additional reductions in production on top of the broader deal by the OPEC plus countries.
Saudi announced a reduction of 1 million barrels of oil per day from July while Russia started cutting down daily production by 300,000 barrels per day. There were expectations in the market that both countries would extend the supply cut into October, but they surprised the market by extending the program till the end of December.
Both countries also informed that the plan would be reviewed monthly and adjusted according to market conditions. This has raised worries that demand will exceed supply in the coming quarter sending prices to multi-month highs.
Expecting Brent prices to be in $90-100 range in coming month: Analyst
Economic stimulus measures taken by the Chinese government to boost the country’s faltering economy are expected to raise the demand for oil. The latest data from the country shows that crude oil imports in August
