Oil rally gathers pace as US benchmark WTI hits $90 a barrel
Benchmark US crude oil hit $90 a barrel for the first time since November, the latest milestone in a march higher that’s been led by output cuts from Saudi Arabia and Russia as well as record global consumption.
West Texas Intermediate futures gained as much as 1.7%, briefly nudging above $90. Brent crude also climbed, topping $93 a barrel.
The International Energy Agency warned this week that continued supply cuts by the two OPEC+ leaders are likely to create a “significant supply shortfall” and threaten further price volatility. That came a day after OPEC said the market is facing a deficit of more than 3 million barrels a day next quarter, potentially the biggest in more than a decade.
Prices have soared more than 30% since late June, as demand in the US and China — the top two consumers — remains robust while OPEC+ leaders Saudi Arabia and Russia constrict supplies. The rally is a boost to the economies of oil-producing nations, but is raising fresh questions over whether oil prices will derail efforts by central banks across the globe to quash inflation.
“Heading into the fourth quarter, the market looks a lot tighter,” Ben Cahill, senior fellow at the Center for Strategic International Studies, told Bloomberg television. “The supply cuts from OPEC+ are starting to bite and it looks like we’re heading for a pretty significant supply deficit — so that does mean it’s bullish for prices.”
Signs of near-term strength are abounding at the moment. Some physical grades are commanding hefty premiums to their benchmarks, indicating that refiners are snapping up barrels. Meanwhile, fuels are trading far above crude prices as processors try to keep pace with strong end-user demand.
Spreads between monthly WTI futures are showing a premium for near-term contracts, a condition known as backwardation that typically symbolizes scarce availability of barrels.
