Crude prices rallied to $90 per barrel, the highest in 2023, following the announcement of an extended production cut by Saudi Arabia and Russia. WTI crude has seen a year-to-date gain of 10.36%, while ICE Brent Crude has risen 9.66% YTD.
The extension of the voluntary oil production cut by Russia and Saudi Arabia resulted in Brent crude prices climbing to a 10-month high. These oil production cuts were initially announced after a June meeting of the 23-nation OPEC+ alliance, which includes Russia.
Ravindra Rao further added that “rising energy prices also raise inflation concerns at a time when policymakers are thinking about a dovish pivot. Slowdown concerns from China and Europe after weak PMIs pose a major headwind. We expect prices to stay buoyed on supply woes in the near term, before starting to decline on demand concerns.
WTI Crude prices could rise by another 10%
“Extension of production cuts by Saudi Arabia and Russia by 3 months has led to expectations of supply tightness and heightened demand from traders in crude oil. In August, 2.9 million barrels were added by the US to their strategic reserves. US crude oil inventory is currently at its lowest since Dec 2022. China’s economy is yet to show signs of full-fledged revival. If that happens there could be further impetus to crude prices. WTI Crude prices could rise by another 10% from here over the next few weeks. Once that happens, demand concerns could arise which could lead to some cooling off/profit taking,” said Deepak Jasani, Head of Retail Research, HDFC Securities.
Crude oil prices to remain volatile this week
“Extensions of OPEC+ supply cuts until the end of the year could fuel global supply shortages of crude oil which supported crude oil prices. A larger-than-expected decline in the US crude oil inventories last week also supported global oil prices. However, strength in the dollar index is limiting gains of crude oil. We expect crude oil prices to remain volatile this week amid volatility in the dollar index. Crude oil has support at $85.30–84.50 and resistance is at $86.90–87.60 in today’s session. In INR Crude oil has support at Rs 7,140-7,050, while resistance is at Rs 7,290–7,360,” said Rahul Kalantri, VP Commodities, Mehta Equities.