Oil prices surged on Monday amid expectation of a tighter crude market on supply curbs from OPEC+ members in the fourth quarter of this year and hopes that China’s latest stimulus measures would revitalize the economy.
As of 1255 hours GMT, Brent, the international benchmark for two-thirds of the world’s oil, gained $0.79 (+0.84 percent) to reach $94.72 a barrel. The West Texas Intermediate (WTI), the main oil benchmark for North America, went up by $1.06 (+1.17 percent) to $91.83 a barrel.
Similarly, the price of Russian Sokol increased by $1.70 (+1.97 percent) to $88.08. Arab Light prices witnessed an increase of $1.65 (+1.72 percent) to reach $97.85 a barrel. On the other hand, the price for Opec Basket surged to $95.70 with an increase of $1.61 (+1.71 percent). The OPEC Reference Basket of Crudes (ORB) is made up of Saharan Blend, Girassol, Djeno, Zafiro, Rabi Light, Iran Heavy, Basra Light, Kuwait Export, Es Sider, Bonny Light, Arab Light, Murban and Merey.
Falling global inventories amid a tightening market with the OPEC+ and Saudi production cuts have supported oil prices in recent weeks. The International Energy Agency has forecast a global oil demand growth of 1.5 million barrels per day in the second half of the year, compared with the first half, exceeding supply by 1.24 million bpd during the period.
“From September onwards, the loss of Opec+ production, led by Saudi Arabia, will drive a significant supply shortfall through the fourth quarter,” the IEA said in its monthly report this week.
Opec+ members Saudi Arabia and Russia announced that they would extend supply cuts of a combined 1.3 million bpd to the end of the year.
As part of their voluntary cuts, the kingdom is extending its output reduction of a million bpd until December while Russia is rolling over its export cut of 300,000 bpd until the end of the year.
In its monthly oil market report on Tuesday, Opec said it expected a supply shortfall of 3.3 million bpd over the next three months.
The group also stuck to its oil demand outlook for this year and the next, and said China’s recent stimulus measures would help to revive economic growth.
One of China’s latest policy moves to jump-start the economy has also made market participants and analysts more bullish on oil. Last week, China cut the reserve ratio for banks for a second time this year in a move to increase liquidity in the system.