Oil prices are rising as a subdued supply outlook offsets demand issues

By Arathy Somasekhar

HOUSTON (Reuters) – Oil prices rose on Monday after flirting with $95 a barrel earlier in the session, as expectations of a supply shortfall from extended output cuts by Saudi Arabia and Russia, as well as weak output of shale have outweighed concerns about demand.

Brent crude futures, the global benchmark, were up 50 cents at $94.43 a barrel, after rising as high as $94.45. U.S. West Texas Intermediate crude futures rose 71 cents to $91.48.

Saudi Arabia and Russia this month extended a combined cut of 1.3 million barrels per day (bpd) until the end of the year.

Meanwhile, U.S. oil production from top shale-producing regions is also expected to fall for a third straight month in October to the lowest level since May 2023, the U.S. Energy Information Administration said in a report monthly.

Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman on Monday defended OPEC+ oil supply cuts, saying international energy markets needed light regulation to limit volatility, while warning of uncertainty over Chinese demand , European growth and central bank actions to combat inflation.

Brent and WTI have climbed for three straight weeks to hit their highest level since November and are on track for their biggest quarterly gains since Russia invaded Ukraine in the first quarter of 2022.

Benchmark Brent traded in overbought territory for the seventh straight session, while WTI traded in overbought territory for the fifth straight session.

The market was also seeing some profit-taking, said Dennis Kissler, senior vice president of trading at BOK Financial.

Citi on Monday became the latest bank to predict Brent prices could top $100 a barrel this year. Chevron CEO Mike Wirth also said in a Bloomberg News interview that he believes oil will exceed $100 a barrel.

Production cuts by Saudi Arabia and Russia could lead to a shortfall of 2 million barrels per day in the fourth quarter, and a further reduction in inventories could leave the market exposed to further price rises in 2024, ANZ analysts said.

China is a key risk due to its slow post-pandemic economic recovery, although its oil imports have remained robust.

A slew of stimulus measures and a summer travel boom helped industrial output and consumer spending rebound last month, and Chinese refiners boosted output on strong export margins.

Eyes will also be on central banks this week, including an interest rate decision from the US Federal Reserve.

The Bank of England is likely to raise interest rates again this week, possibly the last hurray for one of the most aggressive tightening cycles in 100 years, as a cooling economy begins to worry policymakers .

(Reporting by Arathy Somasekhar in Houston, Natalie Grover in London and Florence Tan and Sudarshan Varadhan in Singapore; Editing by David Goodman, Timothy Gardner, Will Dunham and Christina Fincher)