By Myra P. Saefong and William Watts
Oil hits new high in 2023; Treasury Secretary Yellen expects prices to stabilize
Oil futures hit new highs for the year on Monday, after posting a third straight weekly rise on continued concerns over tight crude supplies.
Oil has “maintained its momentum thanks to the existence of some potential green signs among Chinese macroeconomic indicators,” said Tim Waterer, chief market analyst at KCM Trade. That data included an improvement in Chinese industrial production and consumption last month and 4.6% year-on-year growth in retail sales in August.
The WTI contract is “trying to get above the $90 per barrel level,” Waterer said in an emailed comment.
“Technical indicators are starting to look a little stretched,” he said. “Nevertheless, supply-side reductions should limit any downward movement in the oil market for the time being.”
WTI rose 3.7% last week, while Brent rose 3.6%; both ratings ended Friday at their highest levels since November. Crude has been rising sharply since the summer, recovering from a selloff in early 2023, with expectations for tight supplies in the second half of the year overshadowing concerns about the economic recovery in China, the world’s second-largest oil consumer.
Read: Consumers are taking note as inflation takes hold and oil prices exceed $90 per barrel.
Saudi Arabia’s decision to cut production by a million barrels per day starting in July played a major role in the rise in crude prices. The reduction was recently extended until the end of the year, while Russia also decided to cut supplies by 300,000 barrels per day over the same period.
“What is striking is that this relentless rise in oil prices has occurred even against a backdrop of concerns about falling demand from Europe and China, while those economies are experiencing a severe slowdown, demonstrating how tight supply has become,” Marios Hadjikyriacos, senior investment analyst at XM, said in a note.
“The fact that oil rebounded on Friday despite the risk-averse tone in stock markets adds credence to this idea,” he wrote.
Still, some oil producers may look to take advantage of rising oil prices to reach new highs for the year.
“Containing the current uptrend will likely depend on non-OPEC production – particularly US shale – responding more strongly to rising prices and increased global supply,” Robbie said Fraser, head of global research and analysis at Schneider Electric, in a daily. note. “There are early signs that this is happening, but it will take stronger and more consistent action to reverse the trend.”
Read: Janet Yellen expects soaring oil prices to stabilize
-Myra P. Saefong
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