Production cuts, geopolitical tensions drive oil rally

With a potential supply deficit raised by the International Energy Agency, oil prices (CL=F, BZ=F) have soared to a four-month high. Behind the agency's warning are ongoing OPEC+ production cuts and persistent geopolitical tensions that continue to disrupt the global energy landscape.

Yahoo Finance's Ines Ferré breaks down the details.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Angel Smith

Video Transcript

RACHELLE AKUFFO: Well, the price of oil hitting a four month high this week. This comes after the International Energy Agency forecasting a supply deficit through this year, changing its earlier surplus forecast. For more on this, we have our very own Yahoo Finance senior business reporter Inés Ferre. So Inés talk about some of the action that we're seeing here in terms of a combination of production cuts and what the demand picture is looking like.

INES FERRE: Yeah, Rachelle. Well, let me start out with the International Energy Agency and OPEC don't agree on many things. But in this case, now the International Energy Agency is saying that there will be a deficit of oil this year. And part of that has to do with the OPEC plus production cuts which IEA anticipates will go through 2024. Right now those production cuts are set through the second quarter of this year for now.

So the IEA again revising its supply forecasts, now anticipating a deficit and the OPEC plus production cuts by the way are 2.2 million barrels per day. Also the IEA revised its global demand growth upwards to 1.3 million barrels per day. All of this to say is that these are revisions which are bullish for oil prices. We have seen oil running up in the last few days. We're looking at Brent crude that's right now trading above $85 a barrel.

We're also watching WTI that's around $81 a barrel, surpassing that $80 barrel a very psychological level for traders for the industry as well. We have seen attacks on Russian refineries. That is very much impacting supplies because those Russian customers have to go elsewhere in the world to get their supplies. So all of this boding, it's bullish for oil prices and we are now seeing year to date oil is up for Brent, 15% for WTI that is.

And for Brent crude prices also up about 12%. Also Rochelle keep in mind the government, has been refilling its SPR. So part of the reason as well why we have seen US futures higher in the last few weeks as well.

RACHELLE AKUFFO: Indeed starting to see a gas prices ticking up as a result as well. So watch that at the pump. Appreciate--

INES FERRE: And they will continue to-- they will continue to in the next few weeks.