Oil Prices Rise on Anticipated Drawdowns in US Crude Inventories
September 6, 2023
New York – Oil prices saw an upward trend on Wednesday, reversing earlier declines, as traders anticipated further draws on U.S. crude oil inventories. This comes following extended production cuts by Saudi Arabia and Russia.
Brent crude futures rose by 72 cents to reach $90.76 a barrel at 1:26 p.m. EDT (1726 GMT), while U.S. West Texas Intermediate crude (WTI) futures rose by 89 cents, or 1%, to trade at $87.58.
“We have pretty low crude supplies in the U.S., with several weeks of big crude oil draws pushing prices up,” said Bob Yawger, director of energy futures at Mizuho.
Six analysts polled by Reuters estimated that U.S. crude inventories fell by about 2.1 million barrels in the week ending on September 1.
The polls were conducted ahead of reports from the American Petroleum Institute industry group, due at 4:30 p.m. EDT (2030 GMT) on Wednesday, and the U.S. Energy Information Administration, due at 11 a.m. EDT (1500 GMT) on Thursday. The delay in reporting was due to Monday’s Labor Day holiday.
On Tuesday, both Saudi Arabia and Russia announced the extension of voluntary oil supply cuts until the end of the year. Saudi Arabia reduced its output by 1 million barrels per day (bpd), while Russia cut its production by 300,000 bpd. These cuts were in addition to the April agreement by several OPEC+ producers to cut production until the end of 2024.
Both countries will review market conditions and make monthly decisions on whether to deepen the cuts or increase output.
Reflecting concerns about near-term supply, front-month Brent futures traded near nine-month highs, with a spread of $4.13 a barrel above prices in six months. The equivalent spread for U.S. WTI futures reached as high as $4.88 a barrel, also near nine-month highs.
Oil prices initially fell on Wednesday due to concerns about interest rate hikes and investor worries about the economy. Data showed the ISM non-manufacturing Purchasing Managers’ Index (PMI) coming in at 54.5, compared to expectations of 52.5.
Analysts warned that potential price increases could impact demand as U.S. refineries enter their September-October maintenance period. Additionally, the possibility of increased supply from Iran, Venezuela, and Libya could also have a weighing effect.
Research company IIR Energy predicts that U.S. oil refiners will increase their available refining capacity by 274,000 bpd for the week ending September 8.
Additional reporting by Paul Carsten in London, Mohi Narayan in New Delhi, and Arathy Somasekhar in Houston.
Editing by David Evans, Jason Neely, Nick Zieminski, Nick Macfie, and David Gregorio
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