Crude oil prices were up early Friday morning on lingering fears that oil markets remain tight, with the G7 agreeing to a fixed price cap mechanism on Russian crude.
WTI rose nearly 5% at 10:30 a.m. as releases from the Strategic Petroleum Reserve draw to a close. Throughout the SPR’s release period, which spanned from April to the release of approximately 180 million barrels, commercial crude oil inventories increased between 20 and 30 million barrels. With the SPR releases now in the rearview mirror, the market fears a substantial drawdown in US oil inventories. WTI had risen to $92.37 at that time.
The dollar also fell 1.6% on Friday, bolstering the price of WTI as it becomes significantly more attractive to those holding other currencies.
Sanctions by the United States and its G7 allies against Russian oil come into effect on December 5, which are expected to largely reduce Russia’s oil exports by at least some amount. Russian crude oil sanctions, the end of SPR publications, a falling dollar and expected OPEC+ production cuts then collide with stubbornly stable US 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 macroeconomic outlook is creating strong headwinds in the oil market and had it not been for the supply cuts announced by OPEC+ in October, we would likely have been trading at much lower levels,” said Warren Patterson, Head of Commodities Strategy at ING, at Reuters. Friday.
By Julianne Geiger for Oilprice.com
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