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Oil Prices Surge to Highest Level in Over a Year as Crude Stocks Hit Lowest Since July 2021

Oil Prices Surge to Highest Level in Over a Year

Key Storage Hub Records Lowest Crude Stocks Since July Last Year

During Asian trading hours, oil prices reached their highest level in over a year. This surge was triggered by a significant drop in crude stocks at a key storage hub in Cushing, Oklahoma. According to data from the U.S. Energy Information Administration (EIA), inventories fell to 22 million barrels in the fourth week of September, which is close to the operational minimum. This represents a decrease of 943,000 barrels compared to the previous week.

As a result, West Texas Intermediate futures touched $95.03 per barrel, the highest since August 2022. The global benchmark, Brent, also rose by 1.05% to $97.56 per barrel.

Bart Melek, the managing director of TD Securities, explained that this price action is driven by the low inventories in Cushing, stating that it is the lowest level seen since July 2022.

“Rough” Market Conditions if Inventories Continue to Decline

Melek also shared concerns about the market if inventories continue to dip below current levels. He stated that it would become difficult to get crude out into the market. He further predicted that oil prices would remain at a high level for the rest of the year. However, the upside risk exists if the global oil cartel OPEC+ continues to keep supplies tight.

Anticipating a “Robust Deficit” in Global Oil Markets

Malek highlighted the significant shortfall in the global oil markets, which is expected to be further exacerbated this quarter. He attributed this to the oil production cuts implemented by OPEC and its allies. Saudi Arabia, the leader of OPEC+, extended its voluntary crude oil production cut of 1 million barrels per day until the end of the year. This move brings Saudi Arabia’s crude output to nearly 9 million barrels per day.

“We do think that prices could keep up near these levels for quite some time. But I don’t think it’s too permanent. And we might have seen the end of this rally.”

– Bart Melek, Managing Director, TD Securities

Russia has also pledged to extend its export reduction of 300,000 barrels per day until the end of December. Additionally, refinery maintenance season is approaching, which will result in a decline in refinery throughputs. Refinery crude throughput refers to the volume of crude oil a refinery can produce during a given period of time.

Malek expressed that it would not be in OPEC’s interest to see prices reach triple digits as it may lead to long-term demand destruction. He projected that OPEC may signal the end of their strong measures to limit supply as the year comes to a close.

There have been forecasts of $100 per barrel oil in recent days. Goldman Sachs, for instance, raised its 12-month Brent forecast from $93 per barrel to $100, citing “modestly sharper inventory draws.” The investment bank also mentioned strong demand growth from the Asia region and stated that they believe OPEC will be able to sustain Brent in a range of $80 to $105 in 2024.

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Derrick Santistevan
Derrick Santistevan
Derrick is the Researcher at World Weekly News. He tries to find the latest things going around in our world and share it with our readers.

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