Oil holds biggest gain in 6 weeks with supply risks ascendant

Oil held the biggest gain in more than a month as traders weighed supply concerns, including the possibility of an Opec+ output cut.

West Texas Intermediate was steady near $97 a barrel after jumping 4.2 percent in the week’s opening session amid concerns about the potential for supply interruptions in Libya and a bullish energy market outlook from Goldman Sachs Group Inc. Despite militia clashes in Libya, the state oil company reported output of about 1.2 million barrels a day on Monday.

The Organization of Petroleum Exporting Countries and its allies convene on Sept. 5 after a warning from leading member Saudi Arabia that an agreement to reduce production was possible as, in Riyadh’s view, oil futures didn’t reflect fundamentals. Other states in the alliance signaled their support.

Oil’s jump on Monday pared a monthly drop that’s been driven by concern a global slowdown and tighter monetary policy will hurt energy consumption. Still, Europe remains gripped by an energy crisis as Russia chokes off supplies of gas amid the war in Ukraine, and the European Union moves to tighten curbs against Moscow. Shell Plc Chief Executive Officer Ben van Beurden warned Monday the crunch may last for more than one winter.

“A combination of fresh supply risks from Libya, along with uncertainty over the upcoming Opec+ meeting, has provided a boost,” said Warren Patterson, ING Groep NV’s head of commodities strategy. “However, fundamentally the market is in a more comfortable state, and in the absence of a large supply disruption or Opec+ intervention, it is difficult to see significant upside in the short term.”

Widely-watched crude time spreads also suggest a return of market tightness. Brent’s prompt spread—the difference between the two nearest contracts—was $1.90 in backwardation, compared with 60 cents two weeks ago. Bloomberg News

Image credits: Pixabay via Pexels


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