Oil prices hit new 2023 highs on Tuesday amid a supply crunch resulting from output reductions by Saudi Arabia and Russia.
West Texas Intermediate (CL=F) hovered just below $89 per barrel in midday trading. Brent crude futures (BZ=F) sat above $91 per barrel. The prices represent oil's loftiest levels since November 2022.
The rally comes as OPEC data shows the industry faces a supply shortfall of 3 million barrels per day next quarter.
Saudi Arabia and Russia recently announced an extension of unilateral output cuts through year-end, raising worries of tight global inventories. That's on top of OPEC+ reductions announced last year.
"The math is simple—declining supply and rising demand equal higher prices," Adam Turnquist, chief technical strategist for LPL Financial, recently wrote in a note to investors.
Demand data shows an upward trend, despite a choppy recovery in China post-COVID lockdowns.
"World oil demand is scaling record highs," said the International Energy Agency in a recent note.
Oil's recent three-month rally has lifted expectations that inflation could reaccelerate in the near term. The latest Consumer Price Index will be released on Wednesday. Economists expect prices to have accelerated by 0.6% in August from the prior month versus July's 0.2% rise.
Year-over-year inflation is expected to jump to 3.6%, versus 3.2% in July.
Core CPI — which strips out food and energy prices — is expected to stay unchanged on a month-over-month basis.
As momentum in the oil markets continues, some analysts say $100 oil isn't out of the question.
“The notion of $100/bbl has evolved from completely unimaginable a few short months ago, to within striking (or hyping) distance today,” Michael Tran and Helima Croft at RBC Capital Markets wrote in a note to investors on Thursday.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre.