Brent Closes Above $90

Oil prices rose around 0.5% on Friday to be up 2% on the week after Russia and Saudi Arabia unexpectedly extended their output cuts to the end of the year rather than just through October, which is likely to worsen the Q4 market deficit. Consistent with this are signs of tightness in the physical market as US inventory drawdown continued. Thus upward pressure on prices is likely to persist. The USD index was flat.

• WTI rose 0.4% on Friday to be up 2% on the week. It reached a high of $87.95/bbl and closed at $87.23. It has started the week down slightly to $87.05. Resistance is at $88.08, the September 6 high, and is followed by $90.
• Brent rose 2.1% on the week after a 0.6% increase on Friday. It closed at $90.43 holding above the key $90 level. It reached a high of $91.02 but wasn’t able to hold moves above $91 during the week. Resistance is at $91.15 followed by $92.91.
• According to the latest Platt survey, crude output rose in August by 120kbd due to increases in production from Iraq, Iran and Nigeria offsetting the cuts from Saudi Arabia and Russia.
• With Brent around 20% higher this quarter, risks to the disinflation we’ve seen this year are growing especially in countries where demand is still strong enough for higher costs to be passed on.