Oil Holds Near Highest Since November As OPEC+ Tightens Market

(Bloomberg) -- Oil steadied near the highest level since November on expectations that supply cuts by OPEC+ leaders will keep tightening the market.

West Texas Intermediate edged lower near $85 a barrel, while the Brent benchmark was near $88. Options markets have seen a flurry of bullish activity in recent weeks, with call volumes on the US oil futures rising to the highest since May on Friday. 

Russia has said details of the next reductions to crude exports will be released by OPEC+ in the coming days as producers continue to keep a lid on their shipments. Saudi Arabia — which along with Moscow sets the tone at the OPEC+ alliance — is widely expected by traders to follow suit by pushing its voluntary curbs into October.

At an industry conference in Singapore, market heavyweights weighed in. The OPEC+ cuts have been successful, Vitol Group Chief Executive Officer Russell Hardy, said at APPEC. At the same gathering, Ben Luckock, Trafigura Group's co-head of oil trading, said the group's cuts have elevated prices, with Saudi Arabia doing an exceptional job with respect to its market goals.

Oil's fortunes have improved this quarter following a lackluster first half as the supply reductions show signs of rebalancing the market, with US stockpiles slumping. Additional support for crude has come from speculation that the US Federal Reserve may be close to finishing its hiking campaign, as well as signs China's efforts to bolster growth could be starting to gain traction.

“Supply is really tight if Saudi and allies don't reverse their output cuts plan,” said Zhou Mi, an analyst at the Chaos Research Institute in Shanghai, adding that oil prices are now likely to move toward $90 a barrel. In addition, “demand is now looking very optimistic,” Zhou said.

More stories like this are available on bloomberg.com

©2023 Bloomberg L.P.