2023-09-03 22:58:00
Crude oil trading reminder: OPEC production cuts trigger turmoil, China boosts market confidence, international oil prices soar nearly 3%
Months of efforts by OPEC+ to reduce supply have dominated the spot market, while China, a key engine of global crude consumption, has shown renewed determination to boost its economy, sending international oil prices soaring. Last Friday (September 1), international oil prices soared by nearly 3%, with US oil stations hitting the $85/barrel mark, and Brent oil reaching more than $88/barrel.
West Texas Intermediate (WTI) crude traded up $2.29, or 2.75%, to $85.53 a barrel.
(Daily chart of WTI crude oil futures, source: )
The trading price of Brent crude oil (OIL0) rose by US$2.03, or 2.34%, to US$88.75 per barrel.
(Daily chart of Brent crude oil futures, source: )
West Texas Intermediate crude rose for a seventh straight day, extending its longest run since January, to settle at its highest settlement since November. For the week, U.S. crude futures rose 7.2%, their biggest weekly gain since March.
Since April, Saudi Arabia has led the way in asking OPEC and its allies to cut output, boosting depressed oil prices. While the start of the battle gave crude an initial shock, gains faded as Russian supplies remained resilient and concerns over Chinese crude demand lingered. But since late June, crude prices have rebounded as Saudi Arabia’s crude supplies fell to multi-year lows, Russia stepped up its commitment to price-support measures and China stepped up efforts to boost its economy.
Rebecca Babin, senior energy trader at CIBC Private Wealth, said: “$85 is a huge psychological price. To break through and sustain it, we need confirmation that Saudi Russia extended the production cut agreement and believe that China’s stimulus measures have started to work and improve. Sentiment. I think we’re going to break $85 and hold it, but maybe test and fail a few times first.”
Prices were further supported by key U.S. employment data on Friday, with a higher-than-expected unemployment rate and slower wage growth fueling bets the Federal Reserve will end its rate hikes.
Short-term and long-term time differences also show signs of strength. Spot U.S. crude spreads surged to their widest levels since November as crude inventories at Cushing, Oklahoma, continued to decline. The spread between the two closely watched December WTI contracts surged to its widest in a year.
Bets on $100 oil are also rising as supplies tighten. Open interest in $100 call options for the next 12 months has risen from about 80,000 in mid-July to 120,000 today.
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