Oil prices made a significant leap, surging more than 3% on Wednesday, with U.S. crude reaching a 10-month high above $94 per barrel. This sharp rally was driven by another weekly decrease in U.S. crude stockpiles, despite a seasonal decline in road travel and a drop in fuel demand.
The New York-traded West Texas Intermediate (WTI) crude for November delivery settled at $93.68 per barrel, up $3.29 or 3.7% for the day. During the trading session, WTI crude reached a peak of $94.14, the highest level since November.
Meanwhile, London-traded Brent crude for December delivery settled at $94.36 per barrel, up $1.93 or 2.1%. Brent’s peak for the day was $94.78, surpassing its prior high of $95.96 on September 19.
Over the past three months, oil prices have surged by more than 30% in response to production cuts by major oil-producing countries such as Saudi Arabia and Russia. However, concerns regarding economic and demand issues briefly interrupted this rally last week.
Nevertheless, the latest data from the U.S. government showing a second consecutive weekly decline in crude stockpiles reignited the upward movement in oil prices. The U.S. crude inventory balance decreased by 2.169 million barrels for the week ending September 22, exceeding expectations. Additionally, stockpiles at the Cushing, Oklahoma hub, a central delivery and storage point for U.S. crude, fell by 0.943 million barrels.
The situation at Cushing, where inventories are nearing historically low levels, has raised questions about the quality of the remaining oil and its potential to fall below minimum operating levels.
Despite this tight supply situation, fuel demand in the United States has been declining with the change of season from summer to autumn. Gasoline inventories increased by 1.027 million barrels last week, contrary to expectations of a drawdown. Distillate stockpiles also saw a rise of 0.398 million barrels, again defying expectations of a draw.
As both WTI and Brent approach the $100 per barrel mark, some analysts anticipate that economic concerns will emerge as energy-driven inflation weighs on global finances. Factors such as a stronger U.S. dollar, rising Treasury yields, and slowing consumer spending may influence the oil market in the coming months.
Dennis Kissler, Senior Vice President of Trading at BOK Financial, remarked that the market is currently overbought, suggesting that a correction may be needed in the near future.
