Oil prices rebounded on Thursday as markets focused their attention on the outlook for tighter crude oil supply through the remainder of 2023, with demand expected to remain strong into next year.
Brent crude futures rose 36 cents, or 0.4%, to $92.24 a barrel at 03:00 GMT. West Texas Intermediate crude (WTI) rose 35 cents, or 0.4%, to $88.87 a barrel.
Fears of supply shortages are supporting oil prices as producers remain steadfastly committed to limited production.
Saudi Arabia and Russia’s extension of oil production cuts to the end of 2023 would mean a significant market deficit in the fourth quarter, the International Energy Agency (IEA) said on Wednesday, as it largely stuck to its forecasts for demand growth this year and next.
On the other hand, the Organization of the Petroleum Exporting Countries (OPEC) on Tuesday maintained its forecasts for strong growth in global oil demand in 2023 and 2024.
The lack of cuts at the start of 2024 would affect the balance, but stocks are also likely to remain at uncomfortably low levels.
While the oil market certainly looks tight over the next two to three quarters as supply constraints remain if strong demand continues, for the sake of target prices.
The market expects ongoing geopolitical risks and the uncertain economic environment to cause Saudi Arabia to continue these production cuts in the first quarter of 2024.
Both benchmarks hit 10-month highs on Wednesday ahead of data showing a surprise increase in U.S. crude oil and fuel stockpiles that have markets worried about demand.
US crude inventories rose by 4 million barrels last week, beating analysts’ expectations for a 1.9 million barrel decline. As refineries increased their activities, fuel stocks increased more than expected.
On the economic front, the latest data on US inflation has supported expectations that the Fed will not raise interest rates next week and may extend the pause further, boosting hopes for rising oil demand.
Higher interest rates could slow economic growth and reduce oil demand by increasing borrowing costs for businesses and consumers.
