Rising Oil Prices Reflect Growing Investor Confidence in Risk-taking

Oil Prices Rebound with Global Supply Concerns and US Fiscal Respite

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TOKYO, Oct 2 - As the new week kicked off this Monday, oil prices were seen ascending, dusting off some of the descent witnessed last Friday. This comes as the global supply narrative tightens and a last-ditch agreement over the weekend averted a U.S. government shutdown, refreshing the risk-taking palate of investors.

The upward climb saw Brent December crude futures up by 18 cents, or 0.2%, standing at $92.38 a barrel by 0037 GMT, in contrast to a 90 cent dip last Friday. Meanwhile, Brent November futures came to a rest at $95.31 a barrel at the close of its contract last Friday, down by 7 cents.

Across the pond, U.S. West Texas Intermediate crude futures took an upward stride of 23 cents, or 0.3%, to hit $91.02 a barrel, making up for the 92 cent dip observed last Friday.

Both these benchmark oils saw a substantial rally of nearly 30% in the third quarter, driven by predictions of a stark crude supply shortfall in the forthcoming quarter. This follows after both Saudi Arabia and Russia decided to extend their supply cutbacks till the year-end.

As we look ahead, the collaborative venture of the Organization of the Petroleum Exporting Countries alongside Russia and other allies, collectively known as OPEC+, is slated to retain its existing oil output stance. This consensus emerged as four OPEC+ insiders shared with Reuters, ahead of the panel convening this Wednesday. The backdrop of stringent supplies coupled with a surge in demand is fuelling this oil price rally.

"Kicking off the week on a bullish note, oil prices reflected concerns over supply with OPEC+ likely to maintain its current stance. The U.S. averting a government shutdown over the weekend also played its part in offering some solace," commented Hiroyuki Kikukawa, the head honcho of NS Trading, a subsidiary of Nissan Securities.

He further articulated, "Nonetheless, the trajectory hereon will hinge on evolving demand trends."

In a dramatic turn of events, Kevin McCarthy, the Republican Speaker of the House of Representatives, sought Democratic support to usher through a short-term funding bill. This maneuver shoved the shutdown scare to mid-November, ensuring over 4 million federal employees their paychecks remain uninterrupted for the time being.

On the supply side, a stir was caused as the count of U.S. oil and gas rigs, a precursor to future output, dwindled by seven to 623 in the week ending Sept. 29, marking a nadir since February 2022, as disclosed by energy services behemoth Baker Hughes (BKR.O) in its keenly observed report last Friday.

Looking forward, Brent is pegged to average at $89.85 a barrel in Q4 and $86.45 in 2024, as per a collation of forecasts from 42 economists, curated by Reuters last Friday.

As the attention shifts towards the East, investors are treading cautiously around the Chinese economic landscape. Despite a marginal uptick in factory activity during September, as revealed by a private-sector survey on Sunday, the pace was found wanting. External demand seems to be a drag, albeit the production saw an increment.

China, being the world's second mammoth economy, is displaying glimpses of stabilization post a string of mild policy tweaks. However, a real estate downturn, dwindling exports, and heightened youth unemployment are brewing a concoction of concerns, especially around the potential tapering of fuel demand.

Source : Reuters (Reporting by Yuka Obayashi)