- Government data indicated a rise in US crude, gasoline, and distillate inventories last week.
- Bank of America analysts suggest that the ongoing supply cuts could push Brent futures above $100.
- US consumer prices rose sharply in August.
On Wednesday, oil prices dropped after reaching a 10-month high earlier, as a surprise increase in US crude inventories countered expectations of limited crude supply for the rest of the year.
The international benchmark, Brent futures, settled at $91.88 a barrel, sliding 18 cents.
During the session, it hit its highest point since November at $92.84 a barrel. Similarly, US West Texas Intermediate crude fell by 32 cents to reach $88.52 despite reaching its session high of $89.64 a barrel, the highest since November.
This price decline occurred after government data indicated a rise in US crude, gasoline, and distillate inventories in the past week. US crude inventories increased by 4 million barrels, contradicting analysts’ expectations of a 1.9 million-barrel decrease.
Despite this, 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. As per the International Energy Agency, this will maintain a substantial market deficit in the fourth quarter.
Bank of America analysts suggest that these ongoing supply cuts could push Brent futures above the $100 per barrel mark before the year’s end.
Underlying US inflation (Source: Bloomberg)
Furthermore, the Bureau of Labor Statistics disclosed that US consumer prices rose sharply in August, primarily driven by a 10.6% surge in retail gasoline prices. The consumer price index increased by 0.3%, excluding food and fuel components.
In response to rising gasoline prices, Jared Bernstein, head of the White House Council of Economic Advisers, mentioned that the US Energy Department has been in talks with oil producers and refiners to ensure stable fuel supplies.
Elsewhere, forecasters anticipate the European Central Bank will raise rates at its meeting on Thursday. Rising global interest rates negatively impact oil demand.
Meanwhile, the IEA has revised its fourth-quarter world crude oil demand growth forecast by 600,000 bpd, a significant adjustment according to Investec analyst Callum Macpherson. He noted, “The deficit in supply is now roughly equivalent to Saudi Arabia’s additional voluntary cut.”
On a separate note, the Organization of the Petroleum Exporting Countries (OPEC) maintained its predictions of solid growth in global oil demand for 2023 and 2024.
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