Skyrocketing Prices Led by OPEC+ Cuts
For the first time this year, Brent crude has surged past $94 per barrel, with its November futures priced at $94.15. West Texas Intermediate (WTI) crude has also climbed to $90.77 per barrel for October futures. This surge in crude oil prices is directly tied to the decision by OPEC+ countries, led by Saudi Arabia and Russia, to continue reducing global supply by 10 million barrels per day (bpd) until the end of December.
Why the Surge in Crude Oil Prices?
Reason One: Voluntary Production Cuts
Earlier this month, oil producers Saudi Arabia and Russia jointly extended their voluntary oil production cut of 1.3 million bpd until the end of the year. This has led to a rapid increase in international crude oil prices.
Reason Two: Strong Future Demand
OPEC maintains its forecasts for strong growth in global oil demand for 2023 and 2024. The producer group expects world oil demand to grow by 2.44 million bpd in 2023 compared to 2.25 million bpd in 2024.
Reason Three: Market Deficit Expected
The International Energy Agency (IEA) indicates that the supply cuts by OPEC+ until the end of 2023 will result in a sufficient market deficit in the fourth quarter, maintaining demand growth estimates for this year and next.
Reason Four: High Demand in Top Consumer Countries
Demand remains robust in the United States and China, the top two oil-consuming countries, while OPEC leaders Saudi Arabia and Russia have limited supply. This oil price rally is boosting the economies of oil-producing countries but puts direct pressure on emerging economies and central banks, which are trying to control inflation.
Indian Companies Seeking Russian Crude Oil Options
Indian petroleum companies are exploring possibilities to purchase crude oil from Russia using their $60 million profits stuck in the country. Top Indian petroleum companies—Indian Oil Corporation, Bharat Petroleum Corporation Limited, Oil India Limited, and ONGC Videsh Limited—have not been able to repatriate earnings from their investments in Russian oil and gas sectors due to Western sanctions following the Ukraine conflict.
| Metric | Value |
|---|---|
| Brent Crude (Nov. Fut.) | $94.15 per barrel |
| WTI Crude (Oct. Fut.) | $90.77 per barrel |
| OPEC+ Supply Cut | 10 million bpd |
| Global Oil Demand 2023 | 2.44 million bpd |
| Global Oil Demand 2024 | 2.25 million bpd |
| Stuck Profits in Russia | $60 million |
