Amid grim outlook of oil supply in the market, oil prices rallied more than $1 on Tuesday. The continuous three-week oil price rally was fuelled by weak U.S. shale output and supply concerns from extended production cuts by Saudi Arabia and Russia.
Global benchmark Brent crude futures were up $1.24, or 1.31%, to $95.67 a barrel by 1308 GMT. U.S. West Texas Intermediate crude futures were up $1.92, or 2.1%, to $93.40.
“This crude price rally doesn’t want to stop,” said OANDA analyst Edward Moya. “The oil market will likely be tight throughout the winter,” reported news agency Reuters.
Falling US shale output
The US continued to witness a fall in its shale oil output. Top shale-producing regions of the country are witnessing a constant shrink in their output to 9.393 million barrels per day (bpd) in October, the lowest since May 2023, the U.S. Energy Information Administration said on Monday, reported the news agency. That would be a third consecutive monthly fall.
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The recent estimates of shale oil production have added to the woes of the oil market which is currently under stress because of supply cut. Earlier this month, Saudi Arabia and Russia, as part of the OPEC producer group, extended combined supply cuts of 1.3 million bpd to the end of the year.
Amid fuel price rally, experts hoping for a market correction
The continuous streak of oil price rise could lead to a price correction in the coming days, believe experts and analysts.
“Oil’s ascent into overbought territory leaves the market vulnerable to a correction,” National Australia Bank analysts wrote, pointing to volatility after speeches on Monday by Saudi Aramco CEO Amin Nasser and Saudi Arabia’s energy minister.
The Saudi Aramco CEO reduced the company’s long-term outlook for global demand to 110 million bpd by 2030, down from a previous estimate of 125 million bpd.
Signalling towards rising volatility of the oil market, Saudi Energy Minister Prince Abdulaziz bin Salman defended OPEC cuts. He said that the international energy markets need light regulation to limit volatility. He also warned of uncertainty over Chinese demand, European growth, and central bank measures to tackle inflation.
Market investors have a lot on their plate this week as central banks of major economies are set to announce their interest rate decisions this week. Central banks of the United States, Britain, Japan, Sweden, Switzerland, and Norway will announce their result this week.
This “will do nothing to calm nerves as the clash between considerably reduced supply and less than reassuring economic outlook continues”, said PVM Energy analyst Tamas Varga.
