Brent crude oil trade at $1.74 higher to hit the $93.62 the highest this year, as expectations of tighter supply outweighed worries about weaker economic growth and rising U.S. crude inventories. Brent crude was up $1.74, or 1.88%, at $93.62. The session high of $93.68 was its highest since November 2022. U.S. West Texas Intermediate crude gained $1.57, or 1.8%, to $89.09. It also hit a 10-month high of $90.26. This is good news for Nigeria and oil producing nation as the new price will enhance their revenue and foreign exchange earnings.
On Wednesday, the International Energy Agency said Saudi Arabia and Russia have extended oil output cuts, which will result in a market deficit through the fourth quarter. Prices briefly pulled back on a bearish U.S. inventories report before resuming their climb. “That this genuinely bearish stock report only led to a brief temptation to sell speaks volumes and underlines the market mentality,” said Tamas Varga of oil broker PVM. Both benchmarks had slipped on Wednesday after a U.S. supply report showing rising crude and refined product stocks. Hedge funds have been buying crude oil futures for the past two or three weeks as “fundamentals continue to get stronger, driven mostly by heavy demand for both gasoline and diesel,” said Dennis Kissler, senior vice president of trading at BOK Financial.
Both benchmarks remained in technically overbought territory. A day before the IEA report, the Organisation of the Petroleum Exporting Countries (OPEC) issued updated forecasts of solid demand and also pointed to a 2023 supply deficit if production cuts are maintained. The European Central Bank raised its key interest rate to a record peak but signalled this was likely its final move to tame inflation. U.S. retail sales rose by 0.6% on the month in August driven by higher gasoline prices, above a 0.2% rise forecasted by Reuters-surveyed analysts. Jobless claims in the week to Sept 9 meanwhile rose by 3,000 to 220,000, but fell short of economists’ 225,000 forecast. Investors nonetheless see a 97% likelihood the Federal Reserve will hold interest rates steady in its next meeting on Sept. 20, according to the CME FedWatch Tool.
Meanwhile The Organisation of the Petroleum Exporting Countries (OPEC) said on Thursday data-based forecasts do not support the International Energy Agency’s (IEA) projection that demand for fossil fuels would peak in 2030. IEA Executive Director Fatih Birol said in an op-ed in the Financial Times on Tuesday that new IEA estimates show “this age of seemingly relentless growth is set to come to an end this decade, bringing with it significant implications for the global energy sector and the fight against climate change.” OPEC, de facto led by top oil exporter Saudi Arabia, in its statement on Thursday said what made the projections “so dangerous” is they are often accompanied by calls to stop new oil and gas investments. “Such narratives only set the global energy system up to fail spectacularly,” OPEC Secretary General Haitham Al Ghais said in the statement.
“It would lead to energy chaos on a potentially unprecedented scale, with dire consequences for economies and billions of people across the world.” OPEC said the projections do not factor ongoing technological progress by the oil and gas industry to cut emissions and that 80% of the world’s energy mix comes from fossil fuels, the same as three decades ago. Based only on today’s policy settings by governments worldwide — even without any new climate policies — demand for each of the three fossil fuels is set to hit a peak in the coming years. This is the first time that a peak in demand is visible for each fuel this decade — earlier than many people anticipated,” Birol said in his op-ed. But he added the forecasted decline was “nowhere near steep enough” to limit global warming to 1.5 degrees Celsius, the more ambitious target nations agreed to under the Paris climate agreement.
“Cognisant of the challenge facing the world to eliminate energy poverty, meet rising energy demand, and ensure affordable energy while reducing emissions, OPEC does not dismiss any energy sources or technologies, and believes that all stakeholders should do the same and recognise short- and long-term energy realities,” Al Ghais said in the OPEC statement.