Oil prices surged on Thursday, with U.S. crude surpassing the $90 per barrel mark, fueled by mounting expectations of a tightening supply.

West Texas Intermediate (WTI) crude advanced by 1.6%, reaching a peak of $90.04 per barrel, marking its highest level since November 2022.

Brent crude followed suit, rising by 1.7% to $93.47 per barrel, hitting a 10-month high. WTI crude’s most recent trade settled at $90.02 per barrel, CNBC reported.

This upward momentum is attributed in part to Saudi Arabia and Russia’s decision to extend their oil production cuts until the end of 2023, a move that the International Energy Agency suggested could lead to a substantial market deficit for the remainder of the year.

The agency stated in its monthly report, “Starting from September, the reduction in OPEC+ production… is expected to drive a notable supply shortage throughout the fourth quarter.”

The escalating crude prices may translate into higher gasoline costs at a time when the economy is grappling with recovery efforts and inflation concerns.

The Consumer Price Index, a gauge of inflation, recorded its most significant monthly increase of the year in August, with energy prices accounting for a significant portion of the rise, surging by 5.6%, including a substantial 10.6% spike in gasoline prices.

WTI crude has seen nearly a 3% increase this week, marking its third consecutive weekly gain, and the prices have risen by approximately 13% since the beginning of the year.

Earlier this week, OPEC updated its demand forecasts, signaling robust demand, and also indicated the possibility of a supply deficit in 2023 if production cuts persist.

Written by staff