Oil settled at nine-month highs as investors digested a decision by OPEC+ leaders Saudi Arabia and Russia to extend supply curbs until the end of the year.
Riyadh and Moscow’s strategy is aimed at further draining stocks and was felt throughout the oil market complex. The December-to-December spread in West Texas Intermediate, a favored oil hedge fund trade, has strengthened to the highest since late 2022.
The global benchmark, Brent, was above $90 on Thursday, the highest since November. Adding to the bullish sentiment, Saudi Arabia raised official selling prices for its flagship Arab Light crude in Asia to a 10-month high, a sign of its confidence in demand.
Still, crude is showing warnings that it is overbought with a 14-day relative strength index, raising the risk of a pullback.
Oil rallied strongly this quarter after the Organization of the Petroleum Exporting Countries and its allies adopted group-wide supply cuts that were later supplemented by additional, voluntary cuts. The production curbs have been implemented as the International Energy Agency estimates that global crude oil consumption is running at a record pace.
“It was absolutely a surprise,” said Nadia Martin Wiggen, director of commodities-focused hedge fund Svelland Capital. “As we look towards the beginning of next year after these cuts, we will see levels of OECD trade stocks at lows that we have not seen except in very large years.”
Goldman Sachs Group Inc. said OPEC+ moves brought upside risks to its price outlook, according to a report. Analysts at the bank outlined several scenarios, including one that saw Brent extend gains above $100 a barrel, although they stressed this was not a base-case view.
Prices:
- WTI for October delivery rose 85 cents to settle at $87.54 a barrel in New York.
- Brent for November settlement rose 56 cents to settle at $90.60 a barrel.
