Oil Prices Strengthen To The Highest Level Due To Supply Tightening Expectations

Illustration of offshore oil mines. (photo: dock. Pixabay)

JAKARTA - Oil prices rose at the end of trading Friday (Saturday morning WIB), lifted to the highest level in more than half a year and halted a two-week consecutive decline, supported by supply tightening expectations. Brent crude futures for November delivery increased by 1.66 dollars, or 1.9 percent, to settle at 86.49 US dollars per barrel on the London ICE Futures Exchange. Previously, Brent oil had risen to the highest session of US$88.75 per barrel, the highest since 27 January. West Texas Intermediate crude futures AS for October delivery increased by 1.39 dollars or 1.7 percent, to close at 85.02 dollars per barrel on the New York Mercantile Exchange. Previously, WTI had risen to US$85.81 per barrel, the highest since November 16.8 percent this week, the biggest increase in the week since late July. WTI rose 7.2 percent in the week, the largest weekly rise since March. The Saudi Arabia is expected to extend its oil production reduction voluntarily by 1 million barrels per day to October, extending supply restrictions designed by the Organization of the Petrole Exporting Countries (OPEC) and its allies, collectively known as OPEC+, to support prices. Russian, the second-largest oil exporter in the world, has agreed with OPEC+ partners to reduce oil exports next month, said Deputy Prime Minister Alexander Novak on Thursday 31 August. There is an awareness that the economy will not experience a drastic decline, and a sign that demand is close to the highest record,' said Prices Group analyst Phil Flynn. The public must face a bitter and cold reality that the supply is below average. The demand for oil in the United States is very high, with commercial crude oil supply declining in the last five out of the last six weeks, according to a survey conducted by the US Energy Information Agency. The closely watched US report on Friday (1/9/2023) also suggests an increase in the unemployment rate and moderation in wages, strengthening the expectation of the break of interest terms. Meanwhile, expectations of recovery against demand in other countries are growing. The decline in the euro zone are eased in the euro zone, suggesting that the worst conditions have ended already.

Both OPEC and the International Energy Agency rely on the world's largest oil importer, China, to shore up oil demand for the remainder of 2023, but the slow recovery of the country's economy has worried investors. The rest of this year is expected to cause supply shortages, in part because of global consumption which is quite healthy and partly because of Saudi's determination to provide a high base price, said Tamas Varga of oil broker PVM. Except for China's economy showing a confident revival next year, the atmosphere will be very bad," he said. As an indication of future supply, the number of US oil rigs has not changed at 512 this week, which is the lowest figure since February 2022, energy services firm Baker Hughes said on Friday (1/9/2023).