Oil prices skyrocketed to their highest level since November as Saudi Arabia and Russia agreed to extend voluntary supply cuts until the end of the year. Brent crude futures saw a 1.5% increase, reaching $90.32 per barrel, and even reaching a high of $91.15 earlier in the session. Similarly, U.S. West Texas Intermediate crude (WTI) futures rose by 1.7% to $87.04 a barrel, hitting a 10-month high of $88.07 earlier in the session.
Under the new agreement, both Saudi Arabia and Russia will review supply cuts monthly and may make adjustments depending on market conditions. This move indicates the commitment of both countries to control the oil supply and stabilize the market. Analysts from UBS anticipate a market deficit of over 1.5 million barrels per day in the fourth quarter of 2023 and even predict a rise in Brent crude to $95 per barrel by the end of the year.
The tightening supply for prompt deliveries is evident as front-month Brent and WTI contracts are trading at the highest premium since November. This signifies increasing demand and potential scarcity.
Furthermore, Goldman Sachs has reduced the probability of a U.S. recession starting in the next 12 months from 20% to 15%. The ongoing supply cuts by Saudi Arabia, along with the prospect of a robust U.S. economy, have contributed to the surge in oil demand and prices in recent months.
Since the end of June, both Brent and WTI futures have gained over 20%, indicating the strength of the oil market. These price hikes reflect the positive impact of supply cuts and the overall optimism surrounding the global economic recovery.
Overall, the extension of supply cuts by Saudi Arabia and Russia, along with positive market indicators, has driven oil prices to soar. The tightening supply and increasing demand have propelled Brent and WTI futures to gain significant momentum, rising by more than 20% since June. As market conditions continue to be favorable, experts anticipate further price increases in the coming months.
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