(Bloomberg) — Oil trading hit a 10-month high on fresh signs of physical market tightness following supply cuts by OPEC+ leaders.
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Global benchmark Brent rose for the fourth consecutive day and reached $ 95 per barrel. Premiums for physical barrels are rising as refiners struggle to make enough diesel ahead of a seasonal surge in demand. The tight market has prompted predictions from people like Chevron Corp Chief Executive Officer Mike Wirth that $100 oil will return.
Crude oil has surged more than 30% since mid-June as Saudi Arabia and Russia cut exports to clear inventories and push prices higher. The improving outlook in the world’s two largest economies – the US and China – has also supported oil’s progress. Rising energy costs are likely to fuel inflationary pressures, complicating the job of central bankers.
“The risk of a move to $100 may increase in the short term with the current momentum, but we have less confidence that this will be sustainable,” said Charu Chanana, market strategist at Saxo Capital Markets Pte. “Higher inflation could mean tighter monetary policies and OPEC+ cannot control the demand side.”
Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman said on Monday the Organization of the Petroleum Exporting Countries was working to stabilize oil markets and improve global energy security, without targeting any specific price level. He said the output plans would be reviewed every month.
Underlying market metrics point to near-term tightness. Brent’s three-month spread has moved in backwardation to $3.60 a barrel, which is a bullish pattern. This compares with a difference of $1.26 per barrel about a month ago.
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