Oil Surges Through $85 Barrier as OPEC+ Supply Cuts Grip Market
Oil prices skyrocketed beyond $85 due to an extended endeavor by OPEC+ to limit the amount of oil available in the market, which had a significant impact on the tangible industry. Additionally, China exhibited a renewed determination to enhance its economy, an essential driving force behind the worldwide utilization of crude oil.
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West Texas Intermediate has been on the rise for the seventh consecutive day, further extending its longest winning streak since January and reaching the highest closing price since November. American futures have surged by 7.2% this week, achieving the largest weekly increase since March.
Since April, Saudi Arabia has been at the forefront of a drive to decrease production from OPEC and its partners in order to boost falling prices. Although this initiative initially helped to boost crude oil prices, the impact waned due to the continued strong supply from Russia and concerns regarding China's demand. However, crude oil prices have shown a recent uptick since late June. This is due to Saudi Arabia's decreasing oil exports to the lowest levels in years, Russia's increased commitment to supporting prices, and China's implementation of measures to bolster its economy.
"The price of WTI reaching $85 is a significant milestone," stated Rebecca Babin, an experienced trader in the energy sector at CIBC Private Wealth. "In order for this price to be sustained, we will require confirmation that Saudi Arabia and Russia will continue their production cuts, as well as evidence that China's stimulus measures are positively impacting the market sentiment. Personally, I believe we will surpass the $85 mark and maintain it, although we may encounter some challenges and setbacks initially."
The latest job data in the US, which was released on Friday, provided additional backing for prices. The unemployment rate surpassed expectations and the increase in wages slowed down. This development strengthens the belief that the Federal Reserve will no longer be increasing interest rates.
The differences in prices between oil contracts in the near future and in the distant future are showing indications of being strong. The immediate difference in prices for US crude has increased to its highest point since November, mainly because there is less oil being stored in Cushing, Oklahoma. Moreover, the significant difference between the two closest December contracts for WTI has jumped to the largest it has been in a year, attracting a lot of attention.
Bets on oil prices reaching $100 are also increasing as the availability of supplies becomes limited. The number of open contracts for purchasing oil options at $100 per barrel within the next year has risen from approximately 80,000 in mid-July to 120,000 at present.
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