Crude oil prices rose to $90 per barrel for the first time in 2023 due to supply tightening and, a stronger US dollar. The oil market moved higher with ICE Brent settling above US$90 per barrel for the first time since November.
Saudi and Russian supply cuts were the catalyst for the move higher. Saudi Arabia announced that it would extend its voluntary supply cut of 1MMbbls/d until the end of the year. Russia said it would extend its export cut of 300Mbbls/d through to year-end.
While it was largely expected that these voluntary cuts would be extended, expectations were for a one-month extension rather than three months. This does leave the market with a deeper-than-expected deficit over the fourth quarter of 2023, which should continue to support prices.
“For now, we are reluctant to revise higher our price forecasts on the back of this extension, as demand concerns continue to linger and Iranian supply is rising”, ING analysts said in a note. Iran is producing close to 3.1MMbbls/d and plans to pump around 3.4MMbbls/d. Meanwhile, our oil balance shows a small surplus in the first quarter of 2024, which should limit prices moving significantly higher.
“We continue to forecast that Brent will average US$92/bbl over the fourth quarter of this year”, analysts added. Looking further ahead, analysts at ING said they would not rule out a further extension of these cuts (fully or partially) into early next year, given that our balance sheet shows that the oil market will be in a small surplus over the first quarter of next year.
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