Oil prices remained near a 10-month peak on Wednesday, finding support from supply worries tied to Libya’s output disruptions and OPEC+ production cuts, while also considering global economic headwinds.
Brent crude futures, the international benchmark, inched up by 8 cents, or 0.1%, to reach $92.14 per barrel by 0630 GMT. Meanwhile, U.S. West Texas Intermediate (WTI) crude rose by 13 cents, or 0.2%, to hit $88.97 per barrel.
Both Brent and WTI experienced nearly 2% surges on Tuesday, closing at their highest levels since November 2022.
Satoru Yoshida, a commodity analyst with Rakuten Securities, explained, “Bullish demand outlook by OPEC and the U.S. Energy Information Administration’s (EIA) prediction of a decline in global oil inventories reinforced market views of tightening supply going forward.”
The market also received support from the news of Libya, an OPEC member, shutting four of its eastern oil export terminals due to a deadly storm.
However, Yoshida added that “further gains may be limited as there is also downside pressure from lingering worries over weaker demand in China.”
OPEC maintained its forecasts for strong global oil demand growth in 2023 and 2024, citing indications that major economies are performing better than expected, despite challenges like high interest rates and elevated inflation.
Saudi Arabia and Russia extended voluntary supply cuts of 1.3 million barrels per day (bpd) until the end of the year, keeping supplies tight. Together with other allied producers, they form the OPEC+ group.
Russian oil production is anticipated to decline by 1.5% to 527 million metric tons (10.54 million bpd) this year, according to an interview with Energy Minister Nikolai Shulginov reported by newspaper Izvestia on Wednesday.
Additionally, the U.S. Energy Information Administration (EIA) projected a reduction in global oil inventories of nearly half a million bpd in the second half of 2023, leading to higher oil prices, with Brent expected to average $93 per barrel in the fourth quarter.
Notably, front-month Brent futures contracts traded at a premium of as much as $4.68 per barrel above those for delivery six months ahead on Tuesday. This spread was last observed in November of the previous year, indicating tighter supply conditions in the near term.
On the other hand, the American Petroleum Institute (API) reported an increase in U.S. crude oil, distillate, and gasoline inventories last week, which contrasted with market expectations. Crude stocks increased by around 1.2 million barrels for the week ending September 8, whereas gasoline inventories rose by roughly 4.2 million barrels, and distillate inventories saw an increase of about 2.6 million barrels.
Additionally, the market awaited U.S. inflation data scheduled for release on Wednesday. Analysts expected the year-on-year core consumer price index to moderate to 4.3% in August from a 4.7% gain in July. Investors were keen to see if a softer core inflation reading would be enough to keep the Federal Reserve from raising interest rates into the next year.
