Oil prices climbing now – OPEC+ production cuts tighten the market despite further interest rate hikes

Scott Disavino 07/07, Reuters Energy Correspondent specializing in North American natural gas and power, 07/07/23, “Oil prices up 3% to 9-week high on supply concerns,” https://www.reuters.com/business/energy/oil-prices-steady-rate-hike-fears-offset-signs-tightening-supply-2023-07-07/#:~:text=NEW%20YORK%2C%20July%207%20(Reuters,and%20reduce%20demand%20for%20oil. //SBM

NEW YORK, July 7 (Reuters) - Oil prices climbed about 3% to a nine-week high on Friday as supply concerns and technical buying outweighed fears that further interest rate hikes could slow economic growth and reduce demand for oil.

Brent futures rose $1.95, or 2.6%, to settle at $78.47 a barrel, while U.S. West Texas Intermediate crude (WTI) rose $2.06, or 2.9%, to settle at $73.86.

That was the highest close for Brent since May 1 and WTI since May 24. Both benchmarks ended up about 5% for the week.

"We're knocking on the door of a major breakout to the upside. I think you're seeing some short covering here today ... because a lot of people have been betting on the short side, said Phil Flynn, an analyst at Price Futures Group.

After two months of price consolidation between roughly $73-77, Brent moved into technically overbought territory for the first time since mid April.

"The rally over the last week or so ... has been quite strong and backed by momentum - as well as fresh cuts from Saudi Arabia and Russia," said Craig Erlam, a senior market analyst at OANDA.

Top oil exporters Saudi Arabia and Russia announced fresh output cuts this week bringing total reductions by OPEC+, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, to around 5 million barrels per day (bpd), or about 5% of global oil demand.

"OPEC+ production cuts are expected to tighten the market, driving supply deficits in the second half of 2023, supporting higher oil prices," analysts at U.S. financial services company Morningstar said in a note.

OPEC will likely maintain an upbeat view on oil demand growth for next year, sources close to OPEC said.

Russia's latest pledge to reduce oil exports will not require a similar cut in production, a government source told Reuters.