WTI crude oil has extended higher by $2.36 to $87.88 while brent has edged above $91 for the first time since November 2022.
I suspect there was some 'sell the fact' style profit taking in crude after the Saudi and Russian announcements but now that's being overwhelmed by fundamental buying. The reality here is that there is more oil being consumed in the market right now than is being produced and even small imbalances in the oil market can cause huge price spikes.
Before today's Saudi/Russian announcements, Goldman Sachs backed off a call that they would taper cuts in October and had this to say:
Our analysis and elevated OPEC+ pricing power also suggest that the risks around our OPEC + path, and our assumption that OPEC+ countries reverse half of the May 2023 cut in January 2024, are skewed towards lower supply for longer. We still see a potentially more aggressive OPEC+ price target as the key moderately bullish risk to our 12-month ahead Brent forecast of $93/bbl.
Another thing that points to fundamental tighteness is the blowout in backwardation with front-month crude now trading $8 above December 2024 oil. That's a sign that buyers are pulling crude from inventories because they can't wait until later and is a classic sign of a bull market.
