U.S. oil futures witnessed a significant surge, reaching levels not seen in over a year, driven by a decrease in crude oil inventories in the United States. These gains have added to concerns surrounding tight global oil supplies due to output cuts by OPEC+.
As of 0649 GMT, U.S. West Texas Intermediate crude futures (WTI) were up 85 cents, reaching $94.53 per barrel. During the session, WTI prices exceeded $95, marking the first time since August 2022 that they have reached such heights.
Brent crude futures also experienced a notable climb, increasing by 78 cents, equivalent to 0.8%, and reaching $97.33 per barrel. These levels had not been observed since November.
Analysts have attributed these price surges to the impact of the OPEC+ production cuts announced during the summer, which have led to a notable reduction in crude oil availability. Stefano Grasso, a senior portfolio manager at 8VantEdge in Singapore, commented, “The oil market is quickly coming to terms with the fact that the OPEC+ cuts announced in the summer are having a deep effect on crude availability.”
Despite these price increases, Grasso emphasized that the oil market is still a considerable distance away from price levels that would result in demand destruction, indicating that demand continues to grow.
Furthermore, U.S. government data revealed a significant decline in crude oil stocks, which fell by 2.2 million barrels last week to a total of 416.3 million barrels. This decrease exceeded the expectations of analysts, who had anticipated a drop of 320,000 barrels.
Crude stocks at the Cushing, Oklahoma storage hub, which serves as the delivery point for U.S. crude futures, also experienced a substantial decline. These inventories fell by 943,000 barrels during the week, reaching levels below 22 million barrels, the lowest recorded since July 2022.
The ongoing decline in stockpiles at Cushing is primarily attributed to robust demand from refineries and exports. However, concerns are emerging about the quality of the remaining oil at the hub and whether it will fall below the minimum operating levels.
The reduction in crude oil production, which amounts to 1.3 million barrels per day through the end of the year, was implemented by Saudi Arabia, OPEC, Russia, and other OPEC+ allies. This has contributed to the tightening of the oil market, prompting market participants to closely monitor the situation.
While oil prices are approaching the $100 per barrel mark for Brent, concerns remain regarding the potential impact of higher-for-longer interest rates in the United States, which could dampen enthusiasm and place a cap on prices.
