- Concerns of supply disruptions due to Middle East conflicts eased.
- US producer prices rose higher than expected in September.
- Data indicated a rise of approximately 12.9 million barrels in US crude stocks last week.
On Wednesday, oil prices dropped more than 2% as concerns about supply disruptions due to Middle East conflicts eased. Moreover, Saudi Arabia, the leading OPEC producer, pledged to stabilize the market.
Prices for Brent and WTI had surged over $3.50 per barrel on Monday, driven by worries that the Israel-Palestine clashes might escalate, causing global oil supply disruptions. On Tuesday, prices dipped slightly after Saudi Arabia announced its efforts to prevent an escalation and maintain market stability.
PVM analyst Tamas Varga noted, “Both WTI and Brent retreated yesterday as concerns about sudden supply disruptions have subsided, at least for now.” Meanwhile, Mercuria, a trading house, warned that if Middle East tensions worsened, oil prices could reach $100 per barrel.
Meanwhile, Edward Moya, an analyst at OANDA, commented on the challenging global growth recovery path, citing a weakening US consumer and a potential recession in Germany. The German government confirmed a 0.4% economic contraction this year due to high European inflation.
Elsewhere, Russia and Saudi Arabia met in Moscow, emphasizing ongoing OPEC+ coordination and prioritizing the Russian domestic market. The ban on gasoline and some diesel exports was partially lifted last week in Russia.
US producer prices (Source: Bureau of Labor Statistics)
In the US, producer prices rose higher than expected in September, primarily driven by increased energy and food costs. However, inflation pressures at the factory level continued to ease. Janet Yellen, the US Treasury Secretary, expressed her belief in a soft landing for the US economy despite concerns arising from the situation in Israel.
Uncertainty regarding the US economy’s trajectory led Federal Reserve officials to adopt a cautious stance during their September 19-20 meeting, as revealed in the meeting minutes.
Meanwhile, the US Energy Information Administration (EIA) projected a 200,000 barrel-per-day reduction in global oil inventories in the second half of 2023. This projection is due to voluntary production cuts by Saudi Arabia and OPEC+ countries’ reduced production targets. Additionally, analysts in a Reuters poll anticipated a 500,000-barrel increase in US crude inventories for the week ending October 6.
According to sources citing American Petroleum Institute figures on Wednesday, industry data indicated a rise of approximately 12.9 million barrels in US crude stocks for the week ending October 6.