(Bloomberg) — Oil edged lower from the highest level this year after a surge driven by supply cuts from OPEC+ that have tightened the market.
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Global benchmark Brent slipped below $89 a barrel as a risk-off sentiment was prominent in other markets, including Eurpean equities. The dollar also climbed, making commodities priced in the currency less appealing.
Crude has rallied by about a quarter since late June as the impact of supply reductions — which have been led by Saudi Arabia and Russia — worked their way through the market. Riyadh and Moscow are expected to announce their next steps in the coming days, with the cuts expected to be extended.
“The three rounds of production cuts by Saudi Arabia and its OPEC+ partners since September 2022 fully explain the return to a large deficit,” Goldman Sachs Group Inc. analysts including Daan Struyven said in a note, estimating the shortfall at 2.3 million barrels a day this quarter. “The return to deficits, in turn, largely explains the summer rally in timespreads and oil prices.”
Brent’s prompt spread — the gap between its two nearest contracts — has hit 75 cents a barrel in backwardation, up from 58 cents a week ago. That’s a bullish pattern in which near-term prices command a premium to those further out.
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–With assistance from Yongchang Chin.
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