Brent Oil Price Soars and Could Reach $95! Aggressive Stance of Saudi Arabia and Russia Promises to Cause a Deficit of Over 1.5 Million Barrels Per Day and Affect Global Production and Refining Landscape

Brent Oil Price May Reach US$ 95 Per Barrel By The End Of The Year Due To Production And Refining Cuts By Saudis And Russians

The oil market is in turmoil, with the price of Brent oil surpassing US$ 90 per barrel. This vertiginous rise, the largest since November, was triggered by the surprising announcement from Saudi Arabia and Russia to extend their voluntary supply cuts until the end of the year. This news has left investors on alert, worried about a potential shortage during peak demand in winter. See below what this means for the global oil market.

A Turnaround In Energy Markets: Brent Oil Price Soars

Brent oil futures surged by an impressive US$ 1.04, or 1.2%, closing at US$ 90.04 per barrel, a level not seen since November 2022. Meanwhile, US oil futures (WTI) did not lag behind, registering an increase of US$ 1.14, or 1.3%, closing at US$ 86.69 per barrel, also reaching a 10-month high. The surprise came when it was expected that Saudi Arabia and Russia would extend their voluntary cuts only until October, but they opted for a three-month extension.

The aggressive stance of these two oil-producing giants took the market by surprise, and the impact on global oil supplies should not be underestimated. Combined, the two countries will reduce their production by 1.3 million barrels per day (bpd) for another three months. The uncertainty this generates in the market is notable, as projections now indicate a market deficit of more than 1.5 million bpd in the fourth quarter of 2023.

The intransigent stance of Saudi Arabia and Russia has also led to speculation and analysis about what this means for the market. Giovanni Staunovo, an analyst at UBS, wrote in a note to clients: “With the extension of production cuts, we anticipate a market deficit of over 1.5 million barrels per day in the fourth quarter of 2023.” UBS has now raised its forecast for Brent oil prices, which is expected to reach the mark of US$ 95 per barrel by the end of the year.

The US Economic Outlook Also Influences The Market

The United States, one of the largest consumers and producers of oil in the world, plays a crucial role in this scenario. The American economy is closely tied to oil prices, and Goldman Sachs revised its recession forecasts, lowering the probability of a recession in the US over the next 12 months from 20% to 15%. The supply cuts from Saudi Arabia and the prospect of a less likely recession have helped boost demand and oil prices in recent months.