Oil prices extend gains with US crude climbing above $90 for first time in 2023

Oil prices rose in American trade on Thursday, extending gains for the fifth straight session and scaling a ten-month high, with US crude trading above $90 a barrel for the first time since November 2022. 

The gains came amid expectations of severe market shortages in the final quarter of the year as both Saudi Arabia and Russia extend their voluntary production cuts for three more months.

Such cuts overshadowed concerns about over supply in the US as commercial crude stocks surged last week alongside crude production.

Global Oil Prices

US crude rose 1.4% to $90.03 a barrel, the highest since November 2022, while Brent added 1.6% to $93.42 a barrel, the highest  since November 2022 as well.

US crude rose 0.1% yesterday, while Brent added 0.3%, the fourth profit in a row on expectations of extreme market shortages this year. 

Shortages 

The International Energy Agency said the decision by Saudi Arabia and Russia to cut crude output by 1.3 million bpd until the end of the year will cause shortages in the fourth quarter of the year.

Bank of America analysts believe such cuts will send Brent prices above $100 by the end of the year.

Conversely, OPEC maintained its optimistic outlook for demand growth worldwide this year and next year,while also expecting flexible global economic growth despite higher interest rates.

OPEC specifically expects global demand on crude to rise by 2.25 million bpd in 2024, and to rise by 2.44 million bpd this year.

US Stocks

The Energy Information Administration reported a buildup of 4 million barrels in US crude stocks last week, while analysts expected a 2.2 million barrels drop. 

US production also surged by 100 thousand bpd to a total of 12.9 million bpd, the highest since March 2020.