On Monday, oil prices increased for a third straight session, helped by expectations for a growing supply gap in the fourth quarter as Saudi Arabia and Russia continued their production cuts as well as hope for a rebound in Chinese demand.
By 0622 GMT, Brent crude futures had increased by 71 cents, or 0.8%, to $94.64 per barrel, while U.S. West Texas Intermediate crude futures had increased by 78 cents, or 0.9%, to $91.55 per barrel.
“China’s stimulus policy, resilient U.S. economic data, and OPEC+’s ongoing output cuts are the bullish factors that support the oil market’s upside movement,” CMC Markets analyst Tina Teng said in reference to a reserve ratio reduction by China’s central bank last week to boost liquidity and support its economy.
The U.S. Federal Reserve and other central banks’ choices and statements this week about interest rate plans, as well as significant economic data coming out of China, will be closely watched by traders.
Brent and WTI are on pace to experience their largest quarterly growth since Russia’s invasion of Ukraine in the first quarter of 2022 after rising for three straight weeks to reach their best levels since November.
According to ANZ analysts, the market might see a 2 million barrels per day (bpd) deficit in the fourth quarter as a result of the Saudi and Russian output cuts, and a subsequent depletion in stockpiles could leave the market vulnerable to further price increases in 2024.
As part of the OPEC+ group’s intentions, Saudi Arabia and Russia extended production curbs through the end of the year. Strong export margins have encouraged Chinese refineries to increase production.
“It seems like prices will easily find a home above the $90 per barrel level, which means the focus might shift to the demand outlook from the world’s two largest economies,” said Edward Moya, an analyst at OANDA.
According to ANZ, the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency’s predictions, the global oil demand growth will reach 2.1 million bpd.