Oil futures traded higher Tuesday, with expectations that output cuts by major producers will lead to tighter global crude supplies, prompting prices for the commodity to touch fresh highs for the year.
Traders also awaited further hints on the outlook for global energy demand, with a reading on U.S. inflation and a European central bank decision on interest rates due out this week.
Price action
-
The front-month October West Texas intermediate contract
CL.1,
+1.83% CLV23,
+1.83%
rose $1.55, or 1.8%, to $88.84 a barrel on the New York Mercantile Exchange after trading as high as $89.21, the highest for a front-month contract since November, FactSet data show. -
November Brent crude
BRN00,
+0.04% BRNX23,
+0.04% ,
the global benchmark, gained $1.33, or 1.5%, to $91.97 a barrel on ICE Futures Europe after tapping an intraday high of $91.99. -
Gasoline for October delivery
RBV23,
+0.19%
traded at $2.7208 a gallon, up nearly 0.1%, while October heating oil
HOV23,
-1.23%
fell by 0.9% to $3.3315 a gallon. -
October natural gas
NGV23,
+5.41%
rose by 1.3% to $2.641 per million British thermal units.
Market drivers
A rally in oil prices driven by supply cuts by Saudi Arabia and Russia has lifted U.S. and global benchmark crude prices to levels they haven’t seen since November.
On Tuesday, the Organization of the Petroleum Exporting Countries left its predictions for the global oil market largely unchanged, forecasting demand growth of 2.4 million barrels a day for 2023 and 2.2 million barrels a day for 2024, with both unchanged from the previous month’s report.
The group also tweaked its 2023 supply forecast for non-OPEC members by 100,000 barrels a day to a rise of 1.6 million barrels a day, but left the 2024 supply prediction unchanged from last month, forecasting a rise to 1.4 million barrels a day.
OPEC, however, is now anticipating a supply deficit of 3.3 million barrels a day over the next three months, said Edward Moya, senior market analyst at OANDA, in a note Tuesday. That would be 1 million barrels per day more than some energy traders were anticipating, he said.
A global oil market supply shortfall of more than 3 million barrels a day next quarter would potentially be the biggest deficit in more than a decade as Saudi Arabia extends its production cuts, according to Bloomberg.
The oil market could get even tighter if the economic data starts to improve for Europe or China, “which means we could easily see Brent crude make a run towards the $100-a-barrel level,” Moya said.
The Energy Information Administration will release its monthly short-term energy outlook report later Tuesday, while a report from the International Energy Agency is due out Wednesday.
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