US benchmark oil hit $95 a barrel for the first time in more than a year after a drop in stockpiles at the nation’s major storage hub to critical levels highlighted a widening global deficit.
(Bloomberg) — US benchmark oil hit $95 a barrel for the first time in more than a year after a drop in stockpiles at the nation’s major storage hub to critical levels highlighted a widening global deficit.
West Texas Intermediate briefly popped above the threshold after jumping 3.6% on Wednesday, its biggest gain since early May. Inventories at Cushing, Oklahoma — the delivery point for the US benchmark — dropped just below 22 million barrels, the lowest since July 2022 and close to operational minimums.
“My fear in this market is we have de-stocked so much inventory,” Amrita Sen, co-founder and head of research at consultant Energy Aspects, told Bloomberg TV. “Right now, what’s going on in the US — Cushing is dry.”
Overall US crude stockpiles fell more than expected, according to official data released Wednesday, providing evidence of how rapidly the market is tightening due to supply cuts from Saudi Arabia and Russia. WTI has jumped by around a third since the end of June, and is on track for the biggest quarterly gain since early 2022, fueling inflation and causing fresh headaches for central banks.
Earlier this month, OPEC forecast a deficit of as much as 3 million barrels a day of crude in the fourth quarter. With demand in the US and China proving resilient, many in the market now see $100 oil as inevitable, even as the dollar rallies and worries about high global interest rates persist.
“It’s only a matter of time before Brent breaks $100 a barrel,” said Warren Patterson, head of commodities strategy at ING Groep NV. “However, we believe any breakout will be relatively short-lived, given the growing pressure that will likely be put on OPEC+ to ease supply cuts.”
The physical tightness is being reflected in oil’s futures curve. WTI’s prompt spread has surged to $2.44 a barrel in the bullish backwardation structure from just 61 cents in the middle of last week. Options trading is also showing concerns about bigger price swings.
Stockpiles at Cushing have dropped for seven straight weeks and many traders consider them to already be at the lowest levels that allow the tanks to operate normally. Last-minute supplies from the hub are becoming increasingly expensive and American crude is getting too pricey for overseas buyers.
Nevertheless, demand appears to be holding up despite the higher prices. Global consumption of transport fuels picked up last week, lifted by Chinese trucking activity and an increase in the country’s international travel ahead of the Golden Week holiday, JPMorgan Chase & Co. said.
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