Surging U.S. Oil Prices Soar $1 Higher as Global Supply Tightens!

U.S. Oil Prices Surge to 1-Year High on Declining Crude Stocks and OPEC+ Cuts

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On September 28th, U.S. oil witnessed an impressive surge, with prices climbing by nearly a dollar per barrel, reaching their highest levels in over a year. This sudden spike was driven by a significant decrease in crude oil inventories within the United States, intensifying concerns about a global supply crunch stemming from production cuts led by Saudi Arabia and the OPEC+ alliance.

Leading the charge were U.S. West Texas Intermediate crude futures (WTI), which soared above the $95 mark for the first time since August of the previous year. At precisely 0145 GMT, WTI was trading at $94.60 per barrel, marking an impressive gain of 92 cents, equivalent to a 1% increase.

Brent crude futures also made notable gains, surging by 77 cents, or 0.8%, to settle at $97.32 per barrel, reaching levels not witnessed since November.

Stefano Grasso, a seasoned senior portfolio manager at 8VantEdge in Singapore, shared his insights, stating, "The oil market is rapidly adjusting to the profound impact of the OPEC+ cuts announced during the summer. Stockpiles are dwindling while demand continues to rise. However, we are still a considerable distance away from price levels that might lead to a decrease in demand."

Government data revealed that U.S. crude oil inventories had declined by a substantial 2.2 million barrels during the previous week, reaching a total of 416.3 million barrels. This decline greatly surpassed the expectations of analysts who had predicted a drop of 320,000 barrels, as indicated in a Reuters poll.

Additionally, data showed that crude oil stocks at the Cushing, Oklahoma storage hub, which serves as the delivery point for U.S. crude oil futures, had fallen by 943,000 barrels during the week, now standing at just under 22 million barrels. This marked the lowest inventory level since July 2022. The consistent decline in Cushing stockpiles was attributed to robust demand from refineries and exports. However, it also raised concerns about the quality of the remaining oil at the hub and the possibility of it falling below the minimum operating levels.

These reductions in crude oil inventories followed the production cuts of 1.3 million barrels per day agreed upon by Saudi Arabia and Russia from the OPEC+ group, which are set to continue until the end of the year. The group is scheduled to convene on October 4th to review market conditions.

Analysts from the National Australian Bank expressed their expectations, saying, "As near-term oil prices continue to push higher, a reduction in current supply cuts is becoming increasingly likely."

Grasso added his perspective, "I believe Saudi Arabia can tolerate significantly higher prices, but not much lower. If cutting production by 10% results in a 30% price increase, it makes perfect sense for them to proceed with it."

In response to the recent spike in retail fuel prices due to increased exports, President Vladimir Putin took action by instructing his government to ensure the stabilization of retail fuel prices. As a result, his deputy prime minister proposed restrictions on the exports of oil products intended for domestic consumption, further contributing to the tightness in the market.

Source: Reuters (Reporting by Florence Tan and Laura Sanicola)