Crude Rally Continues As Supply Restrictions Bite

Crude Continuing HigherCrude oil prices continue to rally this week with the market breaking out to fresh highs for the year. The market has been firmly bullish on the back of the recent news that Saudi Arabia and Russia will extend their supply cuts through year end. The tow two producers, which effectively head the OPEC+ alliance, cut around 1.5% of daily global supply in early summer and, after extending the cuts through to next month, recently announced that the restrictions will continue into 2024.Aramco Cuts Demand OutlookWith the global demand outlook falling amidst the deteriorating economic conditions we’re seeing in the likes of China and the eurozone, tightening market supply has become a major focus point. Crude prices have now risen around 45% from the YTD lows and look poised for further upside. Saudi Aramco recently adjusted its global demand outlook lower to 110 million barrels per day by 2023, down from 125 million at the last update. Additionally, the EIA recently recorded US crude output as likely to fall to below 10 million barrels per day by mid-October.Bullish OutlookWith crude demand stalling and OPEC+ restricting supply, crude prices look very unlikely to turn lower in the near-term. Traders will now be monitoring incoming economic data from the US, China and the eurozone with any fresh weakness likely to underpin crude prices further, atypical to the dynamic we usually see.Technical ViewsCrudeThe rally in crude prices has seen the market breaking above the 82.59 level. This was a major resistance point for crude and the move above this level marks a firmly bullish shift. While above here, and with momentum studies bullish, the focus is on a break of the 93.47 level and a continuation higher towards 101.80 next.