Oil prices charted fresh highs for the year on Tuesday, as traders weighed up supply constraints, while Chevron CEO Mike Wirth predicted prices will return to $100 a barrel.
West Texas Intermediate crude
for October delivery
rose $1.24, or 1.4%, to $92.72 per barrel on the New York Mercantile Exchange. On Monday, oil gained 0.8% to $91.48 per barrel, the highest front-month contract finish since Nov. 7, based on Dow Jones Market Data.
November Brent crude
the global benchmark, rose 60 cents, or 0.6%, to $95.03 a barrel, tapping a high of $95.15 a barrel on ICE Futures Europe. Monday’s close of $94.43 a barrel was the highest since Nov. 11.
fell 0.1% to $2.6955 a gallon, while October heating oil
added 2% to $3.353 a gallon.
October natural gas
traded at $2.795 per million British thermal units, up 2.5%.
Investors have been looking past worries about China’s economic growth and a sluggish economy in Europe to push the commodity higher amid ever-tightening supplies, as Russia and Saudi Arabia have each curbed production. U.S. oil prices gained 3.7% last week and Brent 3.6%, with both also ending Friday and Monday at their highest since November.
“The Saudi appetite to withhold oil from market, supported by Russia maintaining a certain level of export constraint, points to higher prices in the short term, all else equal,” analysts at Citi, lead by Edward Morse, global head, commodities, wrote in a note dated Monday.
However, $90 prices “look unsustainable given faster supply growth than demand growth,” excluding Saudi Arabia and Russia, they said. “Higher prices in the near term could make for more downside for prices next year.”
Over in the U.S., the monthly domestic drilling report from the Energy Information Administration released Monday showed expectations for a fall of 40,000 barrels per day in oil production production from seven major U.S. shale plays in October to 9.393 million barrels a day.
That would be the largest month on month drop since December 2022, StoneX’s Kansas City energy team, led by Alex Hodes, wrote in Tuesday’s newsletter.
Meanwhile, Chevron Corp.
CEO Wirth told Bloomberg TV in an interview on Monday that crude looks likely to reach $100 per barrel, a level it hasn’t seen in more than a year. “Supply is tightening, inventories are drawing. These things happen gradually and you can see it building, and so I think…the trends would suggest that we’re certainly on our way,” he said.
Wirth acknowledged that oil at $100 could cause a “drag” on the U.S. and global economies, as some market observers are fearing.
“But you know, we’ve had relatively higher oil prices here now for most of this year and certainly all of last year. The recession that everyone’s been talking about hasn’t arrived. And so I think the underlying drivers of the economy in the U.S. and frankly globally remain pretty healthy,” he said.
Wirth said they haven’t changed their long-term price expectations for oil, though noted the market has been volatile since the pandemic. “This has been a period of time where prices have been unpredictable and volatile and not what you would call midcycle,” he said.