Oil Rally Intensifies Hitting Fresh Yearly High

Oil extended its rally to a 10-month high as production cuts by leaders of the OPEC+ cartel strain global supplies, a setup that’s projected to create the tightest crude market in a decade in the months ahead.

Global benchmark Brent climbed above $92 a barrel, and West Texas Intermediate settled just shy of $89, both fresh highs for the year. The gains are already showing signs of filtering into fuel markets, with US gasoline prices at the highest seasonal levels in a decade and diesel — the global economy’s workhorse fuel — pushing past $1,000 a ton in Europe.

Oil markets may experience a shortfall of 3.3 million barrels a day in the fourth quarter, the most constrained market in more than a decade, according to a report Tuesday from the Organization of Petroleum Exporting Countries. Meanwhile, the US Energy Information Administration only sees a market deficit of 230,000 barrels a day in the fourth quarter. The International Energy Agency’s outlook is due Wednesday.

Prices have rallied by more than 25% since late June amid solid fuel demand and Saudi Arabian and Russian moves to bolster their petroleum revenues. The US dollar tumbled the most in almost two months on Monday, making commodities priced in the currency more attractive for most buyers.

Still, prominent forecasters such as JPMorgan Chase & Co. and RBC Capital Markets LLC say their core outlook doesn’t assume prices will reach $100 a barrel.

“The upward momentum is exhausted for now,” said Vandana Hari, founder of Vanda Insights in Singapore. “Crude needs fresh cues to pick a direction. We may see a holding pattern of around $90 for Brent.”

Prices:

• West Texas Intermediate for October delivery rose $1.55 to settle at $88.84 a barrel in New York.
• Brent for November settlement rose $1.42 to settle at $92.06 a barrel.