Oil prices extended their gains on Tuesday, marking the fourth consecutive session of increases, as concerns about weak U.S. shale production intensified worries about a supply deficit caused by extended production cuts by Saudi Arabia and Russia.
Brent crude futures, the global oil benchmark, climbed by 41 cents, or 0.43%, reaching $94.84 a barrel as of 0751 GMT. Meanwhile, U.S. West Texas Intermediate (WTI) crude futures gained 92 cents, or 1.01%, settling at $92.40.
Both Brent and WTI crude have experienced three consecutive weeks of price increases and are currently trading at levels not seen in around 10 months.
U.S. oil output from the top shale-producing regions is expected to drop to 9.393 million barrels per day (bpd) in October, reaching its lowest point since May 2023, as reported by the U.S. Energy Information Administration (EIA) on Monday. This would mark the third consecutive monthly decline in production.
These estimates come after Saudi Arabia and Russia decided earlier this month to extend their combined supply cuts of 1.3 million bpd until the end of the year.
Analysts attribute the rising oil prices to concerns over supply tightness and technical factors. Kelvin Wong, a senior market analyst at OANDA in Singapore, noted that there has been a persistent short-term uptrend in WTI crude oil futures, with dips being supported by the 5-day moving average since August 29. This moving average is now acting as a key short-term support at approximately $89.90 per barrel.
However, some analysts caution that oil’s ascent into overbought territory leaves the market vulnerable to a correction. Analysts from National Australia Bank (NAB) pointed to volatility after speeches from Saudi Aramco CEO Amin Nasser and Saudi Arabia’s energy minister on Monday.
Aramco’s CEO lowered the company’s long-term outlook for demand, now forecasting global demand to reach 110 million bpd by 2030, down from a previous estimate of 125 million bpd.
Saudi Arabian Energy Minister Prince Abdulaziz bin Salman defended OPEC+ cuts to oil supply, emphasizing the need for light-handed regulation to limit market volatility. He also expressed uncertainty about Chinese demand, European economic growth, and central bank actions to combat inflation.
This week, central banks in the U.S., Britain, Japan, Sweden, Switzerland, and Norway are set to announce their interest rate decisions. The outcomes of these decisions are expected to contribute to ongoing market volatility as the clash between reduced supply and economic uncertainty persists, according to Tamas Varga of PVM Energy.