Oil futures have rebounded on Friday, following a slight dip in prices in the previous session. Both the U.S. and global benchmarks are on track for a September gain of over 10%, as a tightening supply situation pushes crude oil closer to the $100-per-barrel mark.
- West Texas Intermediate crude for November delivery rose 90 cents, or 1%, to $92.61 a barrel on the New York Mercantile Exchange. It is set for a weekly gain of 2.9% and a monthly advance of 10.8% based on the most actively traded contract.
- November Brent crude, the global benchmark, was up 85 cents, or 0.9%, at $96.23 a barrel on ICE Futures Europe. The most actively traded December contract was also up by 93 cents, or 1%, reaching $90.52 a barrel. This represents a 2% weekly gain and an 8% monthly advance.
Other Market Movements:
- October gasoline edged up 0.1% to $2.508 a gallon.
- October heating oil gained 0.4% to $3.333 a gallon.
- November natural gas fell 0.3% to $2.935 per million British thermal units.
Factors Driving the Market
Oil futures are bouncing back strongly to close the week and month positively after profit-taking caused WTI and Brent prices to decline in Thursday’s session. WTI had briefly crossed the $95-per-barrel mark before reversing course, marking its highest intraday level since August last year. Similarly, Brent also reached its highest level since November.
Crude Oil Prices Surge Amid Tightening Supplies
Crude oil prices have experienced a remarkable surge over the past four months, largely driven by tightening supplies. Industry analysts attribute this rally to Saudi Arabia’s decision in June to cut production by 1 million barrels a day, a reduction that has been extended through the end of the year.
Key Catalysts for Rising Oil Prices
The imposition of production cuts by Saudi Arabia, coupled with Russia’s decrease in oil exports and the ban on certain oil products, has significantly limited the supply of oil. Meanwhile, the demand for oil continues to grow, intensifying the tightening of the oil market. This tightening is further evidenced by the decline in inventories, as highlighted by Carsten Fritsch, a commodity analyst at Commerzbank.
Concerns Mounting Over Supply Shortage
Of particular concern is the dwindling supply at Cushing, Oklahoma, which serves as the delivery hub for Nymex WTI futures. Energy Information Administration data indicates that it fell to approximately 20 million barrels last week. Should this decline persist, there is a real risk of reaching a critical level that could impede further withdrawals. However, Fritsch also notes that crude stocks in the Midwest actually rose last week, suggesting that supplies in the region are relatively more abundant compared to Cushing.
This volatile and unpredictable market continues to be heavily influenced by supply and demand dynamics, further fueling speculation about the future trajectory of oil prices.