Oil Poised For Biggest Weekly Rally Since March On OPEC+ Move
Track the latest oil prices here.
(Bloomberg) -- Oil headed for the biggest weekly gain since early March as OPEC+ put the market on course for further tightening ahead of winter.
West Texas Intermediate traded above $90 a barrel on Friday, bringing futures close to 12% higher for the week, as Brent topped $95 for the first time since mid-September. Time spreads were signaling supply scarcity even before the producer alliance announced its biggest output cut since the start of the pandemic, a move that’s set to squeeze the market even more.
The tightening outlook halted the slide in oil prices, which were weighed down by concerns over a global economic slowdown and aggressive rate hikes by central banks. Russia also reiterated this week that it won’t sell oil to countries that adopt a US-led price cap, adding to supply uncertainty.
Even as crude fell over the last quarter, the factors that were “pushing prices down were coming to an end,” with the sustainability of Russian supply and continued releases from US oil reserves becoming uncertain, said Peter McNally, global sector lead for industrials, materials and energy at Third Bridge. The cuts by OPEC+ leave the market vulnerable ahead of European sanctions on Russian oil imports and the likely return of Chinese demand at year-end.
Aside from the rally in crude prices, diesel has been another pillar of oil market strength this week, as traders brace for scarce supply in the coming winter. Prices in Europe and the US are currently trading above $160 a barrel.
Meanwhile, the US Labor Department reported that the unemployment rate matched a five-decade low in September. The report sent equities crashing and the dollar rising on mounting fears that the US Federal Bank might continue rate hikes to combat inflation. In contrast with previous, crude held onto its rally, with supply fears at the forefront.
“Supply fears seem to be the driving force behind the market action this week, putting demand fears back on the back burner for petroleum prices, even though they remain front and center in equity markets,” analysts at wholesale-fuel distributor TACenergy wrote in a note to clients.
The Organization of Petroleum Exporting Countries and its allies plan to reduce output by 2 million barrels a day from November. However, Saudi Arabia’s oil minister said the real-world cut will likely be around 1 million to 1.1 million because some members are pumping well below their quotas.
Elements, Bloomberg’s daily energy and commodities newsletter, is now available. Sign up here.
More stories like this are available on bloomberg.com
©2022 Bloomberg L.P.