Oil futures settled higher on Wednesday, with U.S. prices posting a ninth consecutive climb — the longest streak of daily gains since early 2019.
Prices for U.S. and global benchmark crude futures marked fresh settlement highs for the year so far, following the recent extension of supply cuts by Saudi Arabia and Russia.
Price action
-
West Texas Intermediate crude for October delivery
CL00,
-0.21% CL.1,-0.21% CLV23,-0.21% climbed 85 cents, or 1%, to settle at $87.54 a barrel on the New York Mercantile Exchange, the highest front-month contract finish since Nov. 11, according to Dow Jones Market Data. Prices settled higher for a 9th session in a row for the longest longest daily streak of gains since January 2019. -
November Brent crude
BRN00,
-0.04% BRNX23,-0.04% rose 56 cents, or 0.6%, to $90.60 a barrel on ICE Futures Europe, up a seventh straight session to end the session at the highest since Nov. 16. -
October gasoline
RBV23,
+1.22% added 0.8% to $2.60 a gallon, while October heating oil HOV23,+1.23% lost 0.8% to $3.19 a gallon. -
Natural gas for October delivery
NGV23,
+0.93% settled at $2.51 per million British thermal units, down 2.8%.
Market drivers
“Saudi Arabia and Russia remain firmly in the driver’s seat when it comes to the oil market,” said Tim Waterer, chief market analyst at KCM Trade, in emailed commentary.
Demand-side concerns are being smoothed over with the Organization of the Petroleum Exporting Countries and their allies, together known as OPEC+, “essentially ‘pulling the strings’ and moving the oil price ever higher,” he said.
U.S. data Wednesday showing to economic growth was supportive for oil. An ISM barometer of U.S. business conditions at service companies such as restaurants and hotels strengthened to 54.5% in August — the highest level since February.
Oil rallied Tuesday after Saudi Arabia announced it would extend a voluntary production cut of 1 million barrels a day through the end of the year, alongside the extension of a supply cut by Russia. WTI and Brent closed Tuesday at their highest since November.
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The supply cuts will continue to prop up a fundamentally strong market, said Joe DeLaura, senior energy strategist at Rabobank, in a Wednesday note.
Meanwhile, rig counts are falling in the U.S. while production is ticking up mainly due to drilled — but incomplete — wells being finished off, he said, while noting that crude oil futures are in a strong backwardation, meaning that near-term contracts trade at a premium to later-dated contracts.
Strong backwardation reflects robust physical demand “as refineries run crude at high capacity to try and rebuild depleted downstream products inventories,” he wrote. “It’s the perfect bull market from a real, physical world perspective.”
Still, analysts were uncertain over the possibility that oil will soon reach $100 a barrel.
“The road that could lead crude oil prices toward the $100 [per barrel] psychological mark will likely be bumpy, because higher energy prices have already started being reflected in inflation and inflation expectations,” Ipek Ozkardeskaya, senior analyst at Swissquote Bank, wrote in emailed commentary.
As a result, central banks, including the Federal Reserve, “will have little choice but to keep their monetary policies sufficiently tight to prevent an uptick in inflation,” she said. “That could mean further rate hikes, or keeping the rates at restrictive levels for longer, in which case, oil prices make a U-turn and cheapen due to recession and global demand concerns.”
In the U.S., the Energy Information Administration will release its weekly domestic petroleum supply report Thursday morning, a day later than usual because of Monday’s Labor Day holiday.
On average for the week ended Sept. 1, analysts expect the report to show supply declines of 5.6 million barrels for crude and 840,000 barrels for gasoline, while distillate inventories are seen as holding steady for the week, according to a survey conducted by S&P Global Commodity Insights.
