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Oil Prices Drop Amidst Surprise US Crude Stockbuild

Oil Prices Drop

Oil Prices Drop as International benchmark Brent futures slip to $91.88 per barrel

In a surprising turn of events, oil prices dipped on Wednesday, retracting from a 10-month high, as a surprise increase in US crude inventories overshadowed expectations of a constrained crude supply for the remainder of the year.

Brent Futures Retreat

International benchmark Brent futures experienced a decrease of 18 cents, settling at $91.88 a barrel. This decline followed its session high of $92.84 a barrel, the highest level reached since November. US West Texas Intermediate crude (WTI) also faced a setback, dropping 32 cents to $88.52. WTI reached a session high of $89.64 per barrel, marking its highest point since November.

Supply Concerns Loom on Oil Prices Drop

Front-month Brent futures contracts saw a remarkable spread of $4.90 per barrel compared to deliveries six months further out, marking the widest spread since November. This discrepancy highlights concerns over tightening supply.

Low Volatility Amidst Rising Prices

Despite government data revealing an increase in US crude, gasoline, and distillate inventories, oil prices continued to rise. US crude inventories surged by 4 million barrels, contradicting analysts’ expectations for a 1.9 million-barrel drop.

Supply Cuts Offer Support

Saudi Arabia and Russia have extended their production cuts of 1.3 million barrels per day (bpd) of crude until the end of the year. The International Energy Agency (IEA) predicts that this move will result in a substantial market deficit throughout the fourth quarter.

Bank of America analysts anticipate that the ongoing supply cuts could push Brent futures above the $100 per barrel mark before the year’s end.

Inflation and Fuel Supply Stability

In August, US consumer prices experienced their most significant increase in over a year, primarily driven by a 10.6% surge in retail gasoline prices. The US Energy Department is engaging with oil producers and refiners to ensure stable fuel supplies amidst rising gasoline prices.

ECB Interest Rate Hike Expected

Forecasters anticipate that the European Central Bank (ECB) will raise interest rates at its upcoming meeting, signaling potential shifts in the economic landscape.

The IEA revised its fourth-quarter world crude oil demand growth forecast downward by 600,000 bpd, a substantial adjustment according to Investec analyst Callum Macpherson. This adjustment aligns the deficit closely with Saudi Arabia’s additional voluntary cut.

OPEC’s Optimistic Demand Outlook

On Tuesday, the Organization of the Petroleum Exporting Countries (OPEC) maintained its optimistic projections for robust global oil demand growth in 2023 and 2024.

Four oil ports in Libya, previously shuttered due to powerful storms, reopened on Wednesday, potentially contributing to global supply dynamics.

Trading Compass

Disclaimer: This article serves solely for informational purposes and should not be construe as financial advice. Thus, we strongly advise readers to conduct thorough research and consult with financial professionals before making any investment decisions.


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