Oil futures edged lower early Wednesday, pulling back a day after ending at 2023 highs following the extension of supply cuts by Saudi Arabia and Russia.
Price action
-
West Texas Intermediate crude for October delivery
CL00,
-0.52% CLV23,
-0.52%
fell 28 cents, or 0.3%, to $86.41 a barrel on the New York Mercantile Exchange. -
November Brent crude
BRN00,
-0.64% BRNX23,
-0.64%
declined 41 cents, or 0.5%, to $89.63 a barrel on ICE Futures Europe.
Market drivers
Oil jumped Tuesday after Saudi Arabia announced it would extend a voluntary production cut of 1 million barrels a day through the end of the year, alongside the extension of a supply cut by Russia. WTI and Brent closed Tuesday at their highest since November.
Commodities Corner: Oil trades at 2023 highs. Are U.S. prices headed for $100?
The supply cuts will continue to prop up a fundamentally strong market, said Joe DeLaura, senior energy strategist at Rabobank, in a Wednesday note.
Meanwhile, rig counts are falling in the U.S. while production is ticking up mainly due to drilled — but incomplete — wells being finished off, he said, while noting that crude futures are in a strong backwardation, meaning that near-term contracts trade at a premium to later-dated contracts.
Strong backwardation reflects strong physical demand “as refineries run crude at high capacity to try and rebuild depleted downstream products inventories,” he wrote. “It’s the perfect bull market from a real, physical world perspective.”
This story originally appeared on Marketwatch
