Oil Prices Hit New 2023 Highs Amid Supply Crunch
Oil prices reached new highs in 2023 due to a supply crunch caused by output reductions from Saudi Arabia and Russia.
- West Texas Intermediate (CL=F) traded just below $89 per barrel.
- Brent crude futures (BZ=F) sat above $91 per barrel.
- These prices represent the highest levels since November 2022.
OPEC data shows a projected supply shortfall of 3 million barrels per day in the next quarter.
Saudi Arabia and Russia have extended their unilateral output cuts through the end of the year, causing concerns about global inventories. This is in addition to the reductions announced by OPEC+ last year.
Adam Turnquist, chief technical strategist for LPL Financial, stated that declining supply and rising demand will lead to higher prices.
Despite a choppy recovery in China after COVID lockdowns, demand for oil is trending upwards.
Expectations of Inflation
The recent rally in oil prices has raised expectations of a reacceleration of inflation. The latest Consumer Price Index will be released soon, with economists predicting a 0.6% rise in August compared to July’s 0.2% increase. Year-over-year inflation is expected to jump to 3.6%.
The Core CPI, which excludes food and energy prices, is expected to remain unchanged on a month-over-month basis.
As momentum in the oil markets continues, analysts believe that $100 oil is not out of the question.
Oil prices have reached new highs due to supply constraints caused by output reductions. Rising demand and expectations of inflation further contribute to the upward trend.
About the Author
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre.