Global oil prices are inching closer to $100 a barrel, fueled by concerns over tightening global supplies. Brent futures rose by 1% to $97.25 a barrel, while US West Texas Intermediate crude (WTI) futures briefly reached $95 per barrel, the highest level since August 2022.
Analysts attribute the recent surge in oil prices to the drop in stocks at a strategic storage hub in Cushing, Oklahoma. In the fourth week of September, stocks at this facility fell by 943,000 barrels due to strong refining and export demand. The inventories now stand at just under 22 million barrels, nearing the operational minimum. This information is based on data from the US Energy Information Administration (EIA).
Moreover, total US crude stocks decreased by 2.2 million barrels last week, reaching 416.3 million barrels, according to government data. These numbers far exceeded the predictions of industry experts, who anticipated a drop of only 320,000 barrels.
The decline in oil supplies at the Cushing storage hub is a key driver behind the price increase. Bart Melek, managing director of TD Securities, explained that today’s price action is Cushing-driven, as it reached its lowest level since July 2022. He believes that the global oil market is heading towards a significant deficit, which will lead to high oil prices for the remainder of the year if US storages continue to shrink and OPEC+ maintains tight supplies.
In a recent move, Saudi Arabia, a major oil producer and de-facto leader of OPEC, extended its voluntary oil production cut of 1 million barrels per day until the end of the year. Russia, the world’s second-largest crude producer and an OPEC+ ally, also pledged to extend its voluntary cut in oil exports by 300,000 barrels per day until the end of the year. Additionally, the Russian government implemented a temporary ban on foreign sales of diesel and gasoline to stabilize the domestic fuel market.
The combination of decreasing oil stocks at the Cushing storage hub, OPEC’s production cuts, and Russia’s export restrictions is putting further pressure on global oil supplies. As a result, oil prices are expected to remain at high levels in the coming months.
In conclusion, concerns over tightening global oil supplies have pushed prices closer to $100 a barrel. The drop in stocks at the Cushing storage hub, combined with OPEC+ production cuts and Russia’s export restrictions, has created a deficit in the global oil market. Analysts predict that these factors will keep oil prices elevated for the rest of the year if the trend of shrinking US storages continues.