US light crude oil, the so-called WTI on 1 September 2023 at 13:04 CET , increases its price to USD 84.7 per barrel with a 1.28% increase. In the context of expectations of a further reduction in the supply of this black gold. Oil responds by continuing its strong rise. It turns out that the OPEC+ production cuts and the current reduction in exports are affecting the US supply situation quite strongly. It is also positively affected by the weakening USD and also by the relatively strong decline in US inventories according to the weekly API report. At the same time, US fuel production remains high, leading to an increase in distillate stocks and a slight decrease in gasoline stocks. At the same time, the Department of Energy reports an increase in strategic stocks of around 500,000 quintals. It is worth noting, however, that this is a full week’s increase and it was not that long ago that stocks of up to 1 million quintals per day were being released! Also of concern for US production is the latest news regarding the strengthening Hurricane Idalia, which is heading across the Gulf of Mexico towards one of the key oil producing areas of the United States, generating about 15% of US oil production and about 5% of gas production. Some drilling companies are evacuating their wells in the area.
A key factor pushing up oil prices is concern over the possibility that OPEC+ countries will extend or even deepen supply curbs. Saudi Arabia has previously indicated that it is likely to extend its 1 million barrel production cut until October, and now it is reported that Russia may also decide to extend its 0.5 million barrel export cut until October. While demand from China this year and next remains a major uncertainty, UK bank Barclays believes that supply cuts from OPEC+ are more important than moderate demand issues and, among other things, expects the price of BRENT crude to climb to $97 per barrel next year. Recall that the official US report published on 31 August 2023 showed a 10.5 million barrel drop in crude oil inventories. Inventories of crude oil and oil derivatives are at a five-year low. Demand for oil and the fuels produced from it is rising again and, after a sharp decline in the first year of the pandemic, has returned to the upward trend before the global slump in transport and international trade activity caused by the covid 19 pandemic.