Oil Prices Trend Higher over Supply Restrictions
Oil sustained an uptrend due to crude supply restrictions and an improved demand outlook. Prices surged on Thursday as data showing greater demand in the US, the world’s largest oil consumer, contributed to fears of tight global supplies.
International benchmark crude Brent traded at $94.94 per barrel, gaining 0.61% from the closing price of $94.36 a barrel in the previous trading session on Wednesday.
The American benchmark West Texas Intermediate (WTI) traded at the same time at $94.42 per barrel, up 0.79% from Wednesday’s close of $93.68 per barrel.
Both benchmarks are trading near their highest levels of the year as shrinking US crude inventories feed a tighter supply outlook.
US commercial crude oil inventories fell by around 2.2 million barrels to 416.3 million barrels, compared to the American Petroleum Institute’s expectation of a rise of around 1.6 million barrels, according to data released by the Energy Information Administration (EIA) on Wednesday.
The decrease in stocks signalled a brighter demand outlook in the country but added to fears of tightening global oil supplies this year.
Supply concerns triggered by output cuts in Saudi Arabia and Russia of around 1.3 million barrels per day (bpd) until the end of the year ensured both benchmarks hovered around their highest levels of the year.
The Russian government’s decision on Sep. 21 to limit the export of gasoline and diesel fuel to balance the domestic market also exacerbates supply concerns.
Risk aversion in markets may be weighing on oil prices a little, especially if economic fears are fueling that sentiment, OANDA analyst Craig Erlam said in a note.
Oil prices have rallied strongly on the back of supply restrictions and the economy failing to live up to expectations was always going to be one of the primary counter-risks for the price.
“I wouldn’t say that is now unfolding but clearly, investors are a little concerned about whether the economy can sustain current levels of interest rates for a prolonged period of time.
“From a technical perspective, I’m not seeing anything particularly concerning about the recent pullback. Brent crude still looks well supported, with today’s initial declines being short-lived as the market rebounded around the highs from earlier this month.
“We may still see more of a correction but there’s no clear sign of sentiment turning bearish after such a strong rally over the summer”, Erlam said. #Oil Prices Trend Higher over Supply Restrictions Naira Devaluation Deepens Economic Crisis in Nigeria