Crude Rallies As Market Tightens, Output Cuts Likely To Be Extended

Oil prices rose strongly on Friday as data showed that OPEC+ output in August held steady with lower Saudi production offset by increases in Iran and Nigeria. OPEC+ members are expected to extend output cuts and there’s hope that stimulus in China will make a difference. The rise in the US unemployment rate also increased the prospect that the Fed is on hold now.

• WTI rose 2.9% to close above $86/bbl but has started the week down at $85.91. It trended higher over Friday to reach an intraday high of $86.06 despite the dollar rallying 0.4%. The clear break of resistance at $84.16 has confirmed the uptrend and opened $86.62. Holding above $85 is important psychologically.
• Brent increased 2.3% and tested $89 but made a high of $88.99. It closed at $88.85.
• WTI prompt spreads are signalling a tightening market. According to Bloomberg, the number of contracts betting on $100 oil prices ($100 call option) has increased to 120k at the end of last week from 80k in mid-July. CFTC oil net positions rose to 240.9k in the latest week from 234.4k.