At a steady pace, oil prices continue to rise in early Asian trading on Thursday, after rising to the highest level in 2023 in the previous session, as fears of global supply scarcity worsened in light of the sharp decline in US crude inventories, which have reached critical levels.
Government data showed that US crude oil inventories decreased last week by about 2.2 million barrels, reaching 416.3 million barrels. The decline significantly exceeds analysts’ expectations, according to a Reuters poll, with a decline of approximately 320 thousand barrels.
This came in the wake of voluntary production cuts amounting to 1.3 million barrels per day until the end of the year from Saudi Arabia and Russia.
Price action
Brent crude continues to approach the levels of $100 per barrel, as it is trading in extended trading in Asia on Thursday above the levels of $97, an increase of 0.9 percent, which is the highest level since last November.
US West Texas Intermediate crude futures rose by more than a dollar to $94.70, recording the highest level since August 2022, and US crude had jumped by 3.6 percent upon settlement on Wednesday, its largest gain since early May.
Inventories in Cushing, Oklahoma – the delivery point for US crude – fell to just under 22 million barrels, the lowest level since July 2022 and close to the operating minimum.
Strong dollar fails to hold back oil
“What I fear in this market is that we have reduced too much inventory,” said Amrita Sen, co-founder and head of research at Energy Aspects. “Right now, what is happening in the United States – (a drought for inventories in Cushing),” according to Bloomberg.
Will oil prices reach $100 soon?
West Texas Intermediate crude has jumped by about a third since the end of June, and is on track for its biggest quarterly gain since early 2022, stoking inflation and causing new problems for central banks.
Earlier this month, OPEC forecast a deficit of up to 3 million barrels per day of crude oil in the fourth quarter. With demand in the United States and China proving resilient, many in the market now see a $100 oil price as inevitable, even as the dollar strengthens and concerns about rising global interest rates persist.
The dollar rose to its highest level in ten months against a basket of major currencies, on Wednesday, sending the euro to its lowest level in nine months, and causing increased possibilities for intervention to support the yen.
The dollar index, which measures the currency’s performance against a basket of currencies, rose to 106.7, the highest level since last November 30.
In an exclusive interview with Sky News Arabia, Ole Hansen, head of commodity strategy at Saxo Bank, said that our expectations for oil prices were revised higher after the strong support prices received from the Middle East in terms of continuing to reduce production.
“I simply believe that OPEC expects a large supply deficit during the last quarter of the year, in conjunction with Saudi Arabia maintaining the voluntary reduction, which will keep the markets in a tight state in the coming months, and therefore the risk of oil prices reaching $100 still exists.” In Hansen’s words.
Can the world do without oil?
However, Ole Hansen, head of commodity strategy at Saxo Bank, noted that some countries in the world are heading towards stagflation, which means that demand prospects in 2024 will be fraught with challenges.
He also stressed that OPEC members know full well that high oil prices will kill demand and this is not in their interest.
For his part, Warren Patterson, head of commodity strategy at ING Groep NV, said: “It is only a matter of time before Brent crude exceeds $100 per barrel.” “However, we believe any breakthrough will be relatively short-lived, given the increasing pressure that is likely to be put on OPEC+ to ease supply cuts.”
It is noteworthy that stocks in Cushing have decreased for seven consecutive weeks, and many traders consider them to be already at the lowest levels that allow tanks to operate normally. Last-minute supplies from storage centers have become increasingly expensive, and US crude has become too expensive for foreign buyers.
Mathonière: Oil will remain an important part of the global energy mix
2023-09-28 03:24:25
#strong #dollar #powerless #oil.. #Brent #corner
