Crude prices hit $97 a barrel on supply constraints, further shortages likely

Rising oil prices are a negative for India, which is the world's third biggest importer and relies on imports to meet around 85 percent of its fuel needs.

Brent crude prices continued to surge and hit the $97 a barrel mark on September 28, rising 3 percent overnight and significantly by 30 percent throughout the third quarter of the year. If the trend persists, the ongoing quarter could culminate in the best one for crude oil prices since early 2022, experts said.

Rising oil prices are a negative for India, which is the world's third biggest importer and relies on imports to meet around 85 percent of its fuel needs.

A substantial reduction in US crude stocks, falling well below the critical threshold of 22 million barrels, along with geopolitical interventions such as Saudi Arabia's output cuts and Russia's export restrictions added to worries of tight global supplies, contributing to the rally in prices.

Also Read: Oil rises on US crude draws, tight global supply

Crude traders remain upbeat, with hedge funds placing bullish bets similar to of those seen in February 2022. Oil prices have skyrocketed from $82 on August 23 to a staggering $97 on September 28.

As crude prices display unprecedented volatility and reach highs not seen in nearly a year, a poll by Moneycontrol highlighted that supply cut concerns from the oil-producing countries would be the most important factor for prices in 2023.

"Some optimism for economic recovery in China acts as a tailwind for the black liquid and contributes to the ongoing positive momentum. Fuel demand in China is also expected to pick up during the week-long Autumn festival holiday. As per charts, if current levels sustain, then Brent prices can test $101-a-barrel levels, which were last seen in November 2022," said Kunal Sodhani, vice president of the global trading centre at Shinhan Bank.

The deficit projections for Q4CY23 by key entities like the Organisation of Petroleum Exporting Countries (OPEC), the International Energy Agency (IEA), and the US Energy Information Administration further underline the ongoing imbalance in supply and demand.

OPEC anticipates a deficit of 3.3 million barrels a day, while the IEA expects a shortfall of 1.1 million barrels and the EIA 230,000 barrels.

Global demand estimates for 2023 tell a similar story, with these entities forecasting increased demand for crude oil.

Outlook for Brent crude prices in 2023

While Saxo Bank predicts an average of $94 a barrel, Probis Securities thinks prices could surge above $100 in Q4. Goldman Sachs envisions a $105 price tag, while Bank of America expects an average of $90. Wood Mackenzie and JP Morgan offer differing perspectives at $88 and $100.

(With agency inputs)