On September 14, international crude oil futures rose, and the increase was obvious. The main contract for U.S. WTI crude futures settled at $90.16 a barrel, up $1.64, or 1.9 percent. This year, WTI reached the $90 mark for the first time, hitting a new high since November 2022. The main Brent contract settled at $93.70 a barrel, up $1.82 or 2.0 percent. Expectations of tighter supply overshadowed concerns about slowing economic growth and rising U.S. inventories.
On Wednesday, the International Energy Agency (IEA) said that the Petroleum output Organization and its Allies (OPEC+) extended the production cut, leading Saudi Arabia and Russia will cut crude oil supply by 1.3 million barrels/day plan to extend to the end of the year, because the continuous supply gap caused by production cuts is obvious, may lead to tight crude oil supply in the fourth quarter, institutions and investors generally bullish oil prices. While the U.S. Energy Information Administration (EIA) released a surprise increase in crude oil inventories on Wednesday, the positive news did not shake the market’s view of supply expectations concerns.
To put that in perspective, the EIA reported on Wednesday that U.S. crude inventories unexpectedly rose by 4 million barrels last week, compared with analysts’ expectations for a decline of about 1.9 million barrels. Inventories of refined products also rose. Oil prices briefly pulled back after the report was released, before resuming their rise. It shows that the market still has strong bullish expectations in the case of no change in short-term demand.
On the demand side, the demand for gasoline and diesel in the United States is still strong, especially diesel futures have risen significantly. As the weather turns colder and winter sets in in the Northern Hemisphere, the peak heating oil demand season begins, and the market remains optimistic.
On the macro front, recent economic data has also been good, with U.S. retail sales up 0.6 percent month-on-month in August, beating expectations of a 0.2 percent rise, while weekly jobless claims rose to 220,000, but below expectations of 225,000. The producer price index for final demand rose 0.7 per cent month-on-month in August, beating expectations for a 0.4 per cent rise. Economic data has improved, indicating strong demand in the United States. In addition, China has recently introduced a series of positive measures, the People’s Bank of China announced on the 14th that it decided to cut the deposit reserve ratio of financial institutions by 0.25 percentage points on September 15, 2023, which also played a positive role in boosting market expectations.
In the future market, the business community crude oil analysts believe that in the short term, whether macro, or fundamentals are supportive of oil prices, it is expected that under the tight supply expectations, oil prices will maintain a strong trend, but the current price to a relatively high, the market should be wary of bearish news release caused by the pullback.
(Source: SunSirs)