Fall in US oil stockpile and OPEC tightening of supply amid reopening of economies have pushed oil prices to the highest level since 2018.
The industry-funded American Petroleum Institute reported U.S. crude inventories fell 8.54 million barrels last week. If the Government data later on Wednesday confirm the figures, it will be the largest drop since January.
Brent rose to $74.51 per barrel while Western Texas Intermediate, WTI rose to $72.65 per barrel.
Despite the increasing demand for oil as economies reopen, the Organization of Petroleum Exporting Countries (OPEC) and its allies maintain a cautious approach to boosting supply.
California, the world’s fifth-largest economy fully reopened on Tuesday, while New York lifted its remaining restrictions.
Executives from both Glencore Plc and Vitol Group said this week they see further gains in oil, at the FT Commodities Global summit. There’s even a chance crude prices could hit US$100 a barrel on a lack of supply amid underinvestment in the sector, according to Trafigura CEO Jeremy Weir.
In the U.S., shale producers are holding back from substantial increases in output this year despite rising prices.
“Everybody’s continuing to do the math on rising demand and hesitancy among producers to dive back in and put more oil in the market,” said John Kilduff, a partner at Again Capital, LLC. “So there’s a developing structural supply-demand deficit.”
“It has been a direct path up for oil for a month now, fueled by optimism over rising consumption as global vaccination continues in earnest,” said Howie Lee, an economist at Oversea-Chinese Banking Corp. “We see the market in supply deficit for the rest of 2021, and may peak at $80 before year-end,” he added, with the key downside risk being the delta variant of the Covid-19 virus.
Ifunanya Ikueze is an Engineer, Safety Professional, Writer, Investor, Entrepreneur and Educator.