Oil hits 90 for first time in 2023 on surprise cut extension
2023-09-06
Summary:
Oil surged past $90 in 2023, reaching levels not seen since November, as Saudi Arabia and Russia prolonged supply cuts through year-end.
Oil rose above $90 for the first time in 2023 on Tuesday, the highest since November, as Saudi Arabia and Russia extended their voluntary supply cuts to the end of this year.
Saudi Arabia, OPEC’ de-facto leader, said it would keep its 1 million bpd reduction in place until the end of December.
Meanwhile, Russia’s deputy minister Alexander Novak announced that it would continue a 0.3 million bpd export reduction until the end of the year.
Investors had expected Saudi Arabia and Russia to extend voluntary cuts into October, but the three-month extension was unexpected.
Both countries said they would review the supply cuts monthly, and could modify them depending on market conditions.
Front month Brent and WTI contracts were also trading at their steepest premium since November to later-dated prices, reflecting concerns about the short-term supply.
Also supporting oil prices, Goldman Sachs said it now sees the probability of a U.S. recession starting in the next 12 months at 15%, down from an earlier forecast of 20%.
But Brent has retreated below $90 in early Asia trade on Wednesday. It will likely be trading sideways with focus back on the demand side though technical indicators suggest further gains.
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