Crude oil futures concluded the week on a high note, reaching their highest levels of the year on Friday, September 8th. This surge in oil prices was primarily fueled by mounting concerns over a constrained oil supply, which, in turn, alleviated anxieties surrounding the global economy and weakened Chinese demand.
West Texas Intermediate (WTI) crude futures experienced a notable uptick, rising by 64 cents, or 0.7%, to settle at $87.51 per barrel. For the week, WTI crude futures saw a robust 2.3% increase. Meanwhile, Brent crude futures climbed by 73 cents, or 0.8%, to settle at $90.65 per barrel, marking their highest level since November 16th and culminating in a 2.4% weekly gain.
The ascent of WTI crude futures toward the $88 mark was primarily driven by concerns revolving around the tight global oil supply. Saudi Arabia’s decision to voluntarily prolong its oil production cuts by 1 million barrels per day until the year’s end contributed significantly to these supply constraints. Russia also extended its cut in oil exports by 300,000 barrels per day, aligning with Saudi Arabia’s efforts to stabilize oil markets.
In a reinforcing development, the U.S. Energy Information Administration (EIA) disclosed that U.S. crude inventories had declined by 6.3 million barrels in the previous week. This drawdown surpassed analysts’ expectations, which had predicted a more modest drop of 5.6 million barrels.
Despite these positive dynamics, oil prices remain influenced by ongoing apprehensions surrounding the economic landscape in China, the world’s largest oil importer. Recent data from China indicated an 8.8% drop in exports and a 7.3% reduction in imports during August. These figures underscore the continued challenges faced by China’s economy, which can ripple through the global oil market.
As the oil market grapples with the interplay of supply dynamics and economic conditions, attention will remain focused on the evolving situation in China and the potential impact on oil prices. The tight supply scenario, reinforced by actions taken by major oil-producing nations, continues to be a key driver supporting oil prices and shaping the energy landscape in the coming weeks.
The Spot Market is Closed
Saturday, September 9, 2023