In a surprising turn of events, crude oil futures closed higher than expected on Wednesday (May 24), driven by a substantial drop in US crude inventories last week, which pointed to robust demand in the market.
The West Texas Intermediate (WTI) crude futures experienced a notable increase of $1.43 or 1.96%, reaching a closing price of $74.34 per barrel. Similarly, Brent crude futures saw a rise of $1.52 or 1.98%, concluding at $78.36 per barrel.
The US Energy Information Administration (EIA) reported a remarkable decline of 12.5 million barrels in crude inventories for the week ending May 19. This figure exceeded analyst expectations by 500,000 barrels, emphasizing the significant reduction in stockpiles.
Furthermore, gasoline stocks witnessed a substantial decrease of 2.1 million barrels, surpassing the projected drop of 800,000 barrels anticipated by analysts. Additionally, distillate stocks, including heating oil and diesel, fell by 600,000 barrels, deviating from analysts’ predictions of a stable situation compared to the previous week.
Contributing to the positive momentum, Saudi Energy Minister Prince Abdulaziz bin Salman made remarks that targeted speculators who had shorted the market, expecting oil prices to decline. Prince bin Salman emphasized that such speculators would face consequences. These statements resonated with investors and fueled expectations that the upcoming meeting of the Organization of the Petroleum Exporting Countries (OPEC) and OPEC Plus on June 4 could result in production cuts.
It is worth noting that while speculators initially bet on a further decrease in oil prices, the potential production cuts by OPEC Plus could prompt them to exit their short positions at a loss if oil prices continue to rise.
James Hiersik, an analyst at FX Empire, commented on the impact of Prince bin Salman’s warning, stating that investors now speculate that OPEC+ may indeed reduce production during the upcoming meeting on June 4.
The unexpected drop in US crude inventories and the optimistic outlook driven by Prince bin Salman’s remarks have collectively contributed to the upward trajectory of oil prices. As the OPEC and OPEC Plus meeting approaches, market participants eagerly await further developments that could influence the future of the oil market.
The Spot Market is Open
Thursday, May 25, 2023