Crude oil prices were on the rise early on Friday morning on continuing fears that the oil markets remain tight with the G7 agreeing on a fixed price capping mechanism on Russian crude.
WTI rose nearly 5% by 10:30 a.m., as the Strategic Petroleum Reserve releases have neared their end. Throughout the SPR release period, which spanned from April to now releasing about 180 million barrels, commercial crude oil inventories rose between 20 and 30 million barrels. With the SPR releases now in the rearview, the market is fearing a substantial decrease in U.S. oil inventories. WTI had risen to $92.37 by that time.
The dollar also fell by 1.6% on Friday, bolstering the price for WTI as it becomes significantly more attractive for those who hold other currencies.
U.S. and its G7 allies’ sanctions on Russian oil go into effect on December 5, which is largely expected to curtail Russia’s oil exports by at least some amount. The sanctions on Russia’s crude oil, the end to the SPR releases, the falling dollar, and OPEC+’s expected production cuts are then colliding with stubbornly flat U.S. oil production, creating the perfect storm for high oil prices.
U.S. crude oil production has remained essentially flat since mid-April, when it was 11.9 million bpd, according to the Energy Information Administration.
"The increasingly gloomy macro outlook is providing some strong headwinds to the oil market and without the supply cuts announced by OPEC+ back in October, we would likely have been trading at much lower levels," said Warren Patterson, ING's Head of Commodities Strategy told Reuters on Friday.
By Julianne Geiger for Oilprice.com
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Neither the forthcoming US and EU sanctions on Russian crude and petroleum products and capping nor concerns about recession could arrest their surge.
Moreover, President Biden’s release of 195 million barrels from the SPR has on the whole backfired with US commercial inventories expected to show a steep decline soon and also exposing the US to a serious geopolitical risk at a time of rising tension with both Russia and China.
The US Department of Energy (DoE) will never be able to refill its SPR for the foreseeable future because Brent crude will be far above the price President Biden specified for refilling namely $68-$74 a barrel nor will there be spare oil to buy in the current tight market or from a spent US shale oil.
Furthermore, OPEC+ projects in its latest world energy outlook that the demand for crude oil in the short and long term continuing to grow at least until 2045 with demand rising by 2.7 million barrels a day (mbd) to 103 mbd in 2023 and reaching 108.3 mbd by 2030 and 109.8 mbd in 2045..
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert
Either way War with Russia will not be...is not being to be accurate...fought having anything to do with oil in Europe would be an understatement. Everything used now is some form of *"rocket artillery"* which is all chemical based. There might a few ICE Platforms here or there tho this is true.
I reiterate my price target for the US crude oil futures contract price of *ZERO* indeed now we know even negative pricing for US commodities is now possible to include obviously and of course WTI West Texas Intermediate.