Oil steadied after surging to a 10-month high as broader risk-off sentiment cooled a piping hot rally driven by OPEC+ supply cuts and comments from Saudi Arabia’s energy minister shying away from any change in course.

Shrinking supplies have ignited a flurry of predictions that US$100 oil could return on a roster than includes industry heavyweights such as Chevron Corp. Chief Executive Officer Mike Wirth and traditional bears at Citigroup Inc.

Global benchmark Brent futures neared US$96 a barrel for the first time since November before paring gains and settling at US$94.34. 

“The new upside target” sits near US$95 for U.S. futures, Dennis Kissler, senior vice president for trading at BOK Financial Securities, wrote in a note to clients. “That being said, no market goes straight up forever, and at these levels crude futures are very vulnerable to any negative news that could trigger an ‘overbought’ major correction.”

The latest upswing has been marked by major moves in timespreads, some of the market’s most-keenly tracked gauges. Brent and West Texas Intermediate are now trading in backwardation, a bullish pattern indicating tight supplies, of more than US$1 at the front of the curve. That comes as premiums for real-world barrels rocket higher, particularly in the US, traders and brokers said.

Crude has soared by almost one-third since mid-June, with Riyadh and Moscow joining hands to curtail exports in a bid to drain inventories and drive a rebound in prices. An improving outlook in the world’s two biggest economies — the U.S. and China — has also supported the advance. Oil’s relentless surge has been one of the standout features of commodity markets during the current quarter.

On Monday, Saudi Arabian Energy Minister Prince Abdulaziz bin Salman told a conference in Canada that the Organization of Petroleum Exporting Countries was working to keep markets stable and improve energy security, without targeting a specific price. Output plans will be reviewed every month, he said.

The surge in energy costs looks set to boost inflationary pressures, complicating the task facing central bankers. Federal Reserve policy makers began their two-day meeting Tuesday, while Bank of England and Bank of Japan officials also are scheduled to confer this week. Rising prices also pose a political challenge for the Biden administration, with average retail gasoline prices already at a seasonal record in data going back to 2004.

Prices:

• West Texas Intermediate for October delivery fell 28 cents to settle at US$91.20 a barrel in New York.
• Brent for November settlement fell 9 cents to settle at US$94.34.