Oil Prices Up Amid Tight Supply

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Oil Prices Up Amid Tight Supply

Oil Prices Up By 1.5% Amid Tight Supply And Inventories Draw

The crude inventories of the USA have gone through a large drop while the oil market also faces tight supply. In addition, the manufacturing activity in China has also experienced a slowdown. As a combination of these factors, the oil prices jumped higher, which will likely fuel inflation across the world.

After the recent economic data, the US crude futures jumped by 1.5% and were exchanging hands near $82.83/barrel. On the other hand, Brent futures contract jumped 1.1% to reach a price of $86.19.

Meanwhile, the data released a few days ago shows that the annual rate of inflation has accelerated. On the other hand, the jobless claims data is now showing signs of decline. This combination has increased the chances of no action at the next Fed meeting scheduled in September 2023.

Oil Inventories Down By 10.6 Million

The US crude inventories have gone through a significant draw, which has reestablished the positivity in the crude market. As per the EIA, a reduction of 10.6 mn barrels was witnessed in the US stockpiles just a week ago. This is an indication that the summer demand in the USA has reached a peak.

After the recent draw, around 423 mn barrels are now present in the US crude oil inventories. If we look back, such levels of inventory were only last seen in December 2022.

Another factor that is keeping the oil market positive is the fact that the supply side will remain tight for the rest of 2023.

Now, traders are playing the wait-and-see approach about Saudi Arabia's oil production cuts. It remains to be seen whether the oil-producing country will extend the oil cuts or go back to achieving the earlier production numbers.

According to ING analysts, the production cut will be extended for September as well as October. If that's the case, then there's little chance of the crude prices going down for the rest of 2023.

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