EBC Markets Briefing | Crude prices grind higher on Russia tighter supply

Oil prices extended their rally Tuesday after settling up more than a dollar on expectations of tighter supply driven by Russian production cuts and attacks on Russian refineries.

Russia told its oil companies to reduce output to meet an OPEC+ target of 9 million bpd. Meanwhile, Kuibyshev refinery had to shut half of its capacity after intense drone attacks.

The US urged Ukraine to halt strikes on energy infrastructure in Russia given higher inflation risks.

Oil prices have grown nearly 4% since Ukraine began to target refineries which are key to Russia’s economy.

Elsewhere, Israeli PM Benjamin Netanyahu cancelled a visit to the States to discuss a planned invasion of the Gaza city. It is questionable whether a ceasefire would halt the Houthi attacks, if at all.

A month ago, Goldman revised up its oil price forecast to $87 from $85. The investment bank last week said the Fed’s expected rate cuts will benefit commodities, with the biggest boost to metals, flowed by crude oil.

Macquarie’s strategist in a note forecast that US refinery crude runs would increase by 300,000 bpd next week but the US production is expected to end the year at a record high of 14 million bpd.

Brent crude faces immediate resistance of $87 where its strong upward trend reversed a week earlier. If the price heads south again, it could find support around $84 and then 200 SMA.

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