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Saudi Arabia and Russia's extension of oil output cuts will
result in a market deficit through the fourth quarter, the
International Energy Agency said on Wednesday before a bearish
U.S. inventories report prompted a slight pullback in prices.
"That this genuinely bearish stock report only led to a brief
temptation to sell speaks volumes and underlines the market
mentality," said Tamas Varga of oil broker PVM.
The tightening oil balance will remain the dominant price driver
for the rest of 2023, he added.
Brent crude was up $1.20, or 1.3%, at $93.08 by 1100 GMT after
touching $93.11 for its highest since November 2022. U.S. West
Texas Intermediate crude (WTI) gained $1.14, or 1.3%, to $89.66,
having also hit a 10-month high.
Both benchmarks had slipped on Wednesday after a U.S. supply
report showing rising crude and refined product stocks.
Priyanka Sachdeva, senior market analyst at Phillip Nova, said
supply fears are underpinning oil prices as producers "adamantly
stick to restricted production".
A day before the IEA report, the Organization of the Petroleum
Exporting Countries (OPEC) issued updated forecasts of solid
demand and also pointed to a 2023 supply deficit if production
cuts are maintained.
"The oil market looks decidedly tight over the next two to three
quarters as supply constraints persist amid robust demand," ANZ
Research analysts said.
In focus later on Thursday will be the latest interest rate
decision from the European Central Bank.
Analyst and investor expectations had been leaning towards a
pause in rate increases until Reuters reported on Tuesday that
the ECB was set to raise its inflation forecast for next year to
more than 3%, bolstering the argument for higher interest rates.
(Reporting by Alex Lawler in LondonAdditional reporting by
Jeslyn Lerh in SingaporeEditing by David Goodman)
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