Oil prices tick up as markets zoom in on supply tightness

An aerial view shows an oil factory of Idemitsu Kosan Co. in Ichihara, east of Tokyo, Japan November 12, 2021, in this photo taken by Kyodo. Mandatory credit Kyodo/via REUTERS

Oil prices edged higher on Thursday, after dipping slightly in the previous session, as markets refocused on expectations of tight crude supply for the rest of 2023.

International benchmark Brent futures climbed 17 cents to $92.05 a barrel at 12:02 GMT, while U.S. West Texas Intermediate crude (WTI) rose 19 cents to $88.71.

Saudi Arabia and Russia’s extension of oil output cuts to the end of 2023 will mean a substantial market deficit through the fourth quarter, the International Energy Agency (IEA) said on Wednesday, as it largely stuck by its estimates for demand growth this year and next.

The Organization of the Petroleum Exporting Countries (OPEC) on Tuesday stuck to its forecasts for robust growth in global oil demand in 2023 and 2024.

Both benchmarks climbed to 10-month highs on Wednesday before data showed a surprise build in U.S. crude and fuel inventories that worried markets about demand.

U.S. crude inventories rose by 4 million barrels last week, confounding analysts’ expectations in a Reuters poll for a 1.9 million-barrel drop. Fuel inventories also rose more than expected as refiners stepped up activity.

On the economic front, investors interpreted the latest reading of U.S. inflation as confirmation the Federal Reserve will not raise interest rates next week and could extend its pause further, buoying hopes of strong oil demand.

Higher interest rates increase borrowing costs for businesses and consumers, which could slow economic growth and reduce oil demand.