Oil prices reached their highest level in over a year as crude stocks at a key storage hub in Cushing, Oklahoma fell to their lowest level since July last year. Crude inventories dropped to 22 million barrels in the fourth week of September, only slightly above the operational minimum. This decline in inventories is driving the price surge in the oil market, with West Texas Intermediate futures touching $95.03 per barrel and global benchmark Brent rising to $97.56 a barrel. Analysts predict that if inventories continue to decrease, it will be challenging to supply enough crude oil to the market.
The global oil market is facing a robust deficit due to the production cuts implemented by OPEC and its allies. Saudi Arabia extended its voluntary crude oil production cut of 1 million barrels per day until the end of the year, reducing its crude output to around 9 million barrels per day. Additionally, Russia has pledged to extend its export reduction by 300,000 barrels per day until the end of December. Refinery throughputs are also expected to decline in the coming months due to refinery maintenance season. Despite the current surge in oil prices, analysts believe it may not be permanent and that prices could stabilize in the near future.
Analysts have also raised concerns about the long-term impact of high oil prices on demand. It is not in OPEC’s interest for prices to go significantly higher, as it may lead to demand destruction. Therefore, they may signal a shift in their supply control measures as the year comes to an end. However, forecasts for $100 per barrel oil have been circulating, with Goldman Sachs recently raising its 12-month Brent forecast to $100, citing inventory draws and strong demand growth from the Asian region. Overall, experts expect oil prices to remain relatively high but with some potential stabilization in the future.