Oil prices reached their highest level in over a year as crude stocks at a key storage hub dropped to their lowest since July 2022. Crude inventories in Cushing, Oklahoma fell by 943,000 barrels compared to the previous week, hovering close to the operational minimum. As a result, US West Texas Intermediate (WTI) futures touched $95.03 per barrel, the highest since August 2022. Global benchmark Brent also rose to $97.56 per barrel. Analysts predict that oil prices will remain high for the rest of the year, particularly if the global oil cartel OPEC+ continues to keep supplies tight.
The current surge in oil prices is driven by the falling inventories at the Cushing storage hub. If these inventory levels continue to decrease, it may become challenging to meet the demand for crude oil. Bart Melek, managing director of TD Securities, believes that oil prices will remain at their high levels for some time, though he does not consider it a permanent situation. He also highlighted the impact of refinery maintenance season, which will lead to a decline in refinery throughputs in the coming months.
Furthermore, OPEC and its allies, including Russia, have implemented production cuts to reduce the supply of crude oil. Saudi Arabia, an OPEC member, extended its voluntary production cut of 1 million barrels per day until the end of the year. Russia has also pledged to extend its 300,000 barrels per day export reduction until December. However, it is not in OPEC’s interest to see oil prices rise too high, as it could lead to long-term demand destruction. Analysts have also been forecasting oil prices reaching $100 per barrel, with Goldman Sachs raising its 12-month Brent forecast from $93 to $100 based on “modestly sharper inventory draws” and strong demand growth from Asia.