Fears surrounding a lack of supply are now trumping the fears surrounding a lack of demand as the industry seeks a delicate balance between the two
The oil market sentiment has shifted. Fears surrounding a lack of supply are now trumping the fears surrounding a lack of demand as the industry seeks a delicate balance between the two.
Crude oil prices-and natural gas, too-climbed on Wednesday, as the API reported that crude oil and petroleum product inventories fell a day earlier.
Oil prices are now at a six-week high.
The price of WTI climbed 3.16% on Wednesday, reaching $72.69 by 10:00 a.m-up $2.23 per barrel on the day. Brent crude climbed 2.89%, up $2.13 per barrel, reaching $75.73.
Natural gas was trading up by 6.69% on the day at $5.612 per MbTU-higher than it has been in more than seven years, and more than quadruple what it was a year ago.
Crude oil stocks fell by 5.4 million barrels for the week ending September 10, the API reported on Tuesday-compared to an anticipated drop of 3.5 million barrels. Part of the inventory decline was due to Hurricane Ida, which shut in at one point nearly all of the crude oil production in the Gulf of Mexico.
2021 has been a particularly brutal hurricane year for the oil industry, and petroleum products inventories have fallen as refinery runs sank due to storms.
The presiding sentiment in the oil industry today appears to be that a wider vaccine rollout will increase oil demand even further.
Limiting the crude oil price gains, however, is China's refinery run rates, which fell to May 2020 levels, diminishing the need for crude oil. China has also released some of its own crude oil from its strategic petroleum reserves to avoid paying today's higher price for crude oil.
By Julianne Geiger for Oilprice.com
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Comments
Still, the surge in oil prices is being aided by declining crude oil stocks in the United States as a result of both rising demand and the impact of hurricane Ida and the availability of billions of vaccines worldwide.
Brent crude price is expected to touch $80 a barrel before the end of the year and average $71-$72 in 2021 with global oil demand reaching 99-100 million barrels a day (mbd) and returning to pre-pandemic level.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London