Oil prices reached their highest level in over a year during Asian trading hours. The surge in prices was driven by a significant decrease in crude stocks at a key storage hub, which fell to their lowest level since July of the previous year. Crude inventories in Cushing, Oklahoma dropped to 22 million barrels in the fourth week of September, approaching the operational minimum. This decline of 943,000 barrels compared to the previous week contributed to the spike in oil prices. The US West Texas Intermediate futures reached $95.03 per barrel, the highest since August 2022, while the global benchmark Brent rose to $97.56 per barrel.
Bart Melek, managing director of TD Securities, attributed the price action to the low crude inventories in Cushing. He mentioned that if inventories continue to dip below current levels, it may become challenging to supply crude to the market. Melek forecasted that oil prices would remain high for the rest of the year, particularly if OPEC+ maintains tight supply levels. He also noted that the global oil markets face a significant deficit due to production cuts by OPEC and its allies.
Malek emphasized the potential decline in refinery throughputs as refinery maintenance season approaches. This decrease in throughputs could further impact the oil market. He also stated that while prices could remain near current levels for some time, he does not believe the rally is permanent. Additionally, it would not be in OPEC’s interest for prices to reach triple digits as they would be concerned about long-term demand destruction. Malek projected that OPEC may signal the end of their strong supply limitation measures as the year progresses. Goldman Sachs has recently raised its oil price forecast to $100 per barrel, citing strong demand growth in the Asia region.
In summary, oil prices surged to their highest level in over a year due to falling crude stocks at a major storage hub. The decline in inventories, particularly in Cushing, Oklahoma, contributed to the spike in prices. Analysts forecast that oil prices will remain high for the rest of the year, and there are discussions about the possibility of reaching $100 per barrel. However, uncertainty remains, and the rally may not be permanent. OPEC’s actions and refinery maintenance season are factors that could influence the direction of oil prices in the coming months.