Oil near $90 as scarce supplies vie with buying exhaustion

Approaching $90 Oil Prices

The cost of oil is on the brink of reaching $90 per barrel, a situation brought about by a shortage of supplies. This is due to certain physical crude cargoes demanding substantial premiums.

Signs of Supply Shortage

The prompt time-spreads are at their broadest in a year, indicating a shortage of supply. However, gains are being limited by macroeconomic headwinds.

Effects of Dollar Strength and Anticipated Rate Hikes

The dollar’s surge to an eight-month peak is reducing the attractiveness of commodities priced in the currency. Furthermore, expectations of rate hikes are fostering a risk-off sentiment across markets.

Oil’s Performance

Despite these hurdles, oil has seen an increase of about 25% since June and is on track for the largest quarterly gain since March 2022. This surge is attributed to supply restrictions by OPEC+ leaders Saudi Arabia and Russia.

Optimistic Wagers on WTI

The rally has prompted hedge funds to increase their optimistic wagers on WTI to the highest level since February 2022. This has sparked discussions of crude oil reaching $100 a barrel.

Focus on China

Market participants are now turning their attention to China in anticipation of a surge in demand. As the world’s leading oil importer, China is preparing for the Golden Week holiday. Over 21 million people are expected to travel during the eight-day period, following record air-passenger traffic in July and August, which has boosted oil consumption.