U.S. crude oil prices added more than $2 a barrel on Thursday, that increase is for a third month in row, on expectations that cuts by the OPEC+ group of oil producing nations, that is led by Saudi Arabia, would continue through the end of 2023.
The Brent crude futures for October expired up $1, or 1.2%, at $86.86 a barrel. The more active November contract gained $1.59, or 1% at $86.83.
The U.S. West Texas Intermediate crude futures (WTI) for October settled at $83.63 a barrel, up $2, or 2.5%.
For 6 months U.S. crude oil futures traded as low as $3.83 below crude for front month delivery, which is the steepest discount since Nov. 17, signaling tight supplies and encouraging inventory draws.
The president of Lipow Oil Associates, Andrew Lipow said that the crude market has been reacting to OPEC production cuts being extended, the cuts could go through the end of the year.
For the month of August, the Brent crude closed about 1.5% higher while WTI gained 2.2%, with both benchmarks posting gains for the 3rd straight month in a row due to signs of tightening supply.
The analysts’ expectations are that the Saudi Arabia will extend a voluntary oil production cut of 1 million barrels per day into October, adding to cuts put in place by the Organization Petroleum Exporting Countries and its allies, or called OPEC+.
A Saxo Bank analyst, Ole Hansen said that with Brent prices having stalled in the mid-$80s. The prospect of those Saudi barrels returning to the market any time soon looks slight and the impact is increasingly being felt across the world as commercial stock levels of crude and fuel products continue to drop.
The latest government data showed U.S. crude oil production surged 1.6% in June to 12.844 million bpd, on the supply side, its highest since February 2020, before the COVID-19 pandemic destroyed demand for fuel and other oil products.