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As Saudi Arabia and Russia prolong production curbs, oil prices reach a 10-month high.

Tuesday saw a 2% increase in oil prices, the highest level since November, as investors were concerned about probable shortages during the peak winter demand period as Saudi Arabia and Russia extended their voluntary supply restrictions by three months to the end of this year.
By 11:43am EDT (1543 GMT), Brent oil futures had increased by $2.08, or roughly 2.3 percent, to $91.08 a barrel, surpassing the $91 mark for the first time since last November.
WTI October futures in the US increased $2.42, or approximately 2.8 percent, to $87.97 per barrel, also a 10-month high.
Investors had anticipated that Saudi Arabia and Russia would extend their voluntary cutbacks until October, but the unexpected three-month extension caught them off guard.
“It appears they are attempting to increase their bet and take advantage of the recent price movements. Put a significant cushion in place for when the cuts stop, Reuters was instructed by OANDA analyst Craig Erlam.
Both nations stated that they would evaluate the supply reductions on a monthly basis and potentially change them in response to market conditions.
We predict a market deficit of more than 1.5 million bpd in 4Q23 because the production cut was extended. As a result, with oil inventories expected to decline even further in the upcoming months, UBS analyst Giovanni Staunovo predicted that Brent would increase to $95 a barrel by year’s end.
Goldman Sachs’ update on the likelihood of a US recession commencing in the next 12 months, which was previously predicted to be 20 percent, helped to support oil prices on Tuesday. Oil consumption and prices have risen recently as a result of expectations that the US economy will avoid a deep recession.
Over three-quarters of the world’s traded oil is priced using Brent futures, which have increased by nearly 26% since late June, when Riyadh initially announced its voluntary cuts.
Tuesday saw the largest premium between the front-month Brent contract and the six-month contract since November 2022, rising to more than $4 per barrel. Backwardation is a structure that denotes tighter supply for fast delivery.