Oil surges through US$85 barrier as OPEC+ supply cuts grip market

Oil prices surged to US$85 as a monthslong effort by OPEC+ to reduce supplies gripped the physical market and China showed a new resolve to bolster its economy, a key engine of global crude consumption.

West Texas Intermediate climbed for a seventh day, extending the longest such run since January and bringing prices to the highest since November. U.S. futures have advanced about 6 per cent this week, heading for the biggest weekly gain since April.

Saudi Arabia has led a charge since April to reduce ouptut from OPEC and its allies in a bid to revive flagging prices. While the campaign’s start gave crude an initial jolt, that gain faded as supplies out of Russia remained resilient and concerns about China’s demand lingered. But crude has rallied since late June as Saudi Arabia’s flows dwindle to multiyear lows, Russia deepens its commitment to the price-support effort and China ramps up measures to strengthen its economy.

“$85 WTI is a huge psychological level,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth. “To break through and hold we will need confirmation of Saudi-Russia cut extensions and confidence that China stimulus has started to take hold and improve sentiment there. I think we will break above $85 and hold, but we may test and fail a few times first.”