Oil extended its rally to hit the highest level since November on expectations that supply cuts by OPEC+ leaders will tighten the market.

West Texas Intermediate climbed for an eighth session, nearing $86 a barrel after an advance that includes last week’s gain of more than 7%. Underlying metrics, including WTI’s prompt spread, have widened markedly in recent days.

Russia announced last week that it will extend export curbs, with more details of the reductions to be released in the coming days. Saudi Arabia — which along with Moscow sets the tone at the OPEC+ alliance — is widely expected by traders to follow suit by pushing its voluntary curbs into October.

Oil’s fortunes have improved this quarter following a lackluster first half as the supply reductions show signs of rebalancing the market, with US stockpiles slumping. Additional support for crude has come from speculation that the US Federal Reserve may be close to finishing its hiking campaign, as well as signs China’s efforts to bolster growth may be starting to gain traction.

The market’s underlying metrics point to expectations for tighter conditions. Among them, the spread between WTI’s two closest contracts has ballooned to 85 cents a barrel in backwardation. That’s a bullish pricing pattern, and is up from 43 cents a barrel one week ago.

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Author: Jake Lloyd-Smith