Coinspeaker
Oil Price Touches One-Year High amid Production Cuts
Oil prices experienced a significant surge to their highest level in more than a year during the Asian trading session on Thursday, September 28. This uptick was due to a substantial decline in crude stocks at a crucial storage hub, reaching their lowest point since July of the previous year.
Specifically, crude inventories in Cushing, Oklahoma, dwindled to 22 million barrels in the fourth week of September. This quantity is perilously close to the operational minimum threshold and represents a decline of 943,000 barrels in comparison to the prior week.
In response to these developments, US West Texas Intermediate (WTI) futures reached $95.03 per barrel during the Asian trading hours, marking the highest price level observed since August 2022. As of the latest trading data, WTI was at $94.61 per barrel. Meanwhile, the global benchmark Brent crude increased by 1.05% to reach $97.56 per barrel.
Speaking to CNBC, Bart Melek, managing director of TD Securities, said:
“Today’s price action seems to be Cushing driven, as it reaches a 22 million bbl low, the lowest level since July 2022.”
Robust Deficit in Global Oil Markets to Continue and Production Cuts
Should these inventory levels persist below the current threshold, the process of distributing crude into the market could become significantly challenging, said Malek.
His projection anticipates that oil prices will persist at elevated levels throughout the remainder of the year. Furthermore, there exists an upside risk in the scenario where the global oil consortium OPEC+ continues to maintain stringent supply controls.
Malek said:
“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.”
Furthermore, Russia has committed to prolong its export reduction by 300,000 barrels per day until the conclusion of December.
Malek also emphasized that refinery throughputs are expected to decrease in the upcoming months as the refinery maintenance season approaches. Refinery crude throughput signifies the quantity of crude oil that a refinery can process within a specified timeframe.
“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,” said Malek. It would not align with OPEC’s interests if prices were to surge significantly into the triple-digit. This could potentially lead to long-term demand reduction, as Malek emphasized.
There have been predictions of oil reaching $100 per barrel in recent days. Goldman Sachs, for instance, increased its 12-month Brent forecast from $93 per barrel to $100 due to “modestly sharper inventory draws”, as stated in a note dated September 20.
The Goldman report further suggested that OPEC could likely maintain Brent within a range of $80 to $105 in 2024, citing robust demand growth in the Asian region.
