US oil futures surged highest level since November on expectations that supply cuts by OPEC+ leaders will keep tightening the market.
The West Texas Intermediate edged down near $85 a barrel, while the Brent benchmark was near $88. The options markets have seen a spell of bullish activity in recent weeks, with call volumes on the US oil futures surging to the highest since May on Friday.
The crude export cut details by Russia will be released by OPEC+ in the coming days as producers continue to keep a lid on their shipments. Saudi Arabia along with Moscow sets the tone at the OPEC+ alliance, is widely expected by traders to follow suit by pushing its voluntary curbs into October.
Vitol Group Chief Executive Officer Russell Hardy, said at APPEC, the OPEC+ cuts have been successful. At the same gathering, in an industry conference in Singapore, Ben Luckock, Trafigura Group’s co-head of oil trading, said the group’s cuts have elevated prices, with Saudi Arabia doing an exceptional job with respect to its market goals.
Despite the US stockpiles slumping, the oil’s fortunes have improved this quarter following a lackluster first half, as the supply reductions show signs of rebalancing the market. Further support for crude has come from speculation that the US (FED) Federal Reserve may be close to finishing its hiking campaign, as well as signs that the China’s efforts to bolster growth could be starting to gain traction.
An analyst at the Chaos Research Institute in Shanghai, Zhou Mi said that the supply is really tight if Saudi and allies don’t reverse their output cuts plan, he is also adding that oil prices are now likely to move toward $90 a barrel, as demand is now looking very optimistic.