Brent crude futures rose by US$1.32, or about 1.5%, to US$90.32
a barrel by 1739 GMT. The global benchmark, used to price over three-quarters
of the world's traded oil, rose to US$91.15 per barrel earlier in the session,
its highest since November 17, 2022.
US West Texas Intermediate crude (WTI) futures rose US$1.49,
or about 1.7%, to US$87.04 a barrel, after also hitting a 10-month high of US$88.07
earlier in the session.
Investors
had expected Saudi Arabia and Russia to extend voluntary cuts into
October, but the three-month extension was unexpected.
"Certainly the market was caught off-guard by the
aggressiveness of their stance," said John Kilduff, partner at Again
Capital LLC in New York.
Both
Saudi Arabia and Russia said they would review the supply cuts monthly, and
could modify them depending on market conditions.
"With the production cut extended, we anticipate a
market deficit of more than 1.5 million barrels per day in 4Q23," UBS
analyst Giovanni Staunovo wrote in a note to clients. UBS now expects Brent
crude to rise to US$95 a barrel by end 2023.
Reflecting concerns about the short-term market supply,
front month Brent and WTI contracts were also trading at their steepest
premium since November 2022 to later-dated prices. This structure, called
backwardation, indicates tightening supply for prompt deliveries.
Also supporting oil prices on Tuesday, Goldman Sachs said it
now sees the probability of a US recession starting in the next 12 months
at 15%, down from an earlier forecast of 20%.
Along with the Saudi supply cuts, which began in July,
prospects of the US economy avoiding a hard recession have helped lift oil
demand and prices in recent months.
Both Brent and WTI futures have gained more than 20% since
the end of June this year.
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