Oil futures continued their upward momentum on Monday, increasing from their 2023 highs and extending a third consecutive weekly climb. The rise in oil prices is driven by ongoing concerns about tightening crude supplies.
One of the factors supporting the price increase is the positive economic indicators from China. The country has seen an improvement in its industrial production and consumption, as well as a 4.6% year-on-year growth in retail sales in August. This has contributed to the upward trend in oil prices.
The West Texas Intermediate (WTI) contract is attempting to remain above the $90 per barrel level, indicating a bullish market sentiment. However, some technical indicators suggest that the market may be becoming overbought. Nevertheless, supply-side cuts, such as Saudi Arabia’s decision to reduce production by 1 million barrels a day starting in July, are expected to limit any downside moves in the near term.
Oil prices have been on a strong upward trajectory since the summer, recovering from a selloff earlier in the year. The anticipation of tighter supplies in the second half of the year has outweighed concerns about economic recovery in China, the second-largest oil consumer globally.
The recent rally in oil prices is remarkable considering the worries about lower demand from Europe and China due to economic slowdowns. This demonstrates the tightness in the supply side of the equation. The fact that oil prices rose on Friday, despite the risk-off sentiment in equity markets, further supports the narrative of a tight supply market.
The decision by Saudi Arabia to extend production cuts through the end of the year, along with Russia’s move to curb supplies, have played significant roles in driving up oil prices.
Overall, the market sentiment remains optimistic as concerns over tightening crude supplies persist.
Source: MarketWatch (operated by Dow Jones & Co.) and Dow Jones Newswires