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Saudi Arabia is widely expected to extend a voluntary 1 million
barrel per day (bpd) oil production cut into October, prolonging
supply curbs engineered by the Organization of the Petroleum
Exporting Countries (OPEC) and allies, known collectively as
OPEC+, to support prices.
Russia, the world's second-largest oil exporter, has already
agreed with OPEC+ partners to cut oil exports, Deputy Prime
Minister Alexander Novak said on Thursday.
The Brent crude price has risen about 3% this week while U.S.
West Texas Intermediate crude (WTI) has advanced by 5%.
At 1020 GMT Brent crude was up 98 cents, or about 1.1%, at
$87.81 a barrel. WTI had risen 95 cents, also about 1.1%, to
$84.58.
"We continue to expect cuts to be extended, with prices above
US$90/bbl (on a sustained basis) required to draw OPEC supply
back to market," National Australia Bank said in a client note
on Friday.
But just how tight the market is also depends on demand.
The appetite for oil in the United States has been robust, with
commercial crude inventories declining in five of the most
recent six weeks, according to surveys conducted by the U.S.
Energy Information Administration.
Changes in U.S. inventories are seen a proxy for changes in the
global production-consumption balance.
Meanwhile, expectations for demand recovery elsewhere are
growing.
A downturn in euro zone manufacturing eased last month,
suggesting the worst may be over for the bloc's beleaguered
factories, while an unexpected rebound in China offered some
hope for export-reliant economies, private surveys showed.
Both OPEC and the International Energy Agency are depending on
the world's biggest oil importer, China, to shore up oil demand
over the rest of 2023, but the sluggish recovery of the
country's economy has investors concerned.
The remainder of this year promises to bring supply shortage,
partly owing to reasonably healthy global consumption and partly
because of the Saudi determination to provide a high price
floor, said Tamas Varga of oil broker PVM.
"Unless the Chinese economy stages a confident revival next year
the mood will sour markedly," he said.
(Reporting by Natalie Grover in London and Sudarshan Varadhan in
SingaporeEditing by David Goodman)
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