Oil prices exceed $85 mark for three consecutive days

NEWSROOM – For the past three days, oil prices have traded at high levels, with a barrel consistently priced at approximately $86. As markets opened Sunday, Brent crude was traded at $85.34 a barrel, while Texas crude oil saw prices at $81.04 a barrel. This marks the first instance in four months where oil prices have consistently stayed above the $85 barrier.

The recent surge in prices can be attributed to several factors, including a decrease in U.S. oil inventories, which has been compounded by heightened demand for gasoline and heating oil within the United States. Additionally, geopolitical tensions in the Middle East have played a significant role in the price increase.

A significant factor in the reduction of U.S. oil inventories is the ongoing demand exceeding supply, particularly since February. This demand, driven by increased consumption of gasoline and heating oil in the United States, has contributed to a notable drawdown. The U.S. Energy Information Administration highlights that this trend is expected to persist, leading to continued price pressures.

The situation is further amplified by OPEC’s production cuts and global petroleum consumption forecasts, which predict an average inventory reduction of approximately 0.4 million barrels per day from July 2023 through the end of 2024. This dynamic indicates a tight supply-demand balance, pivotal in pushing oil prices upward.

Instability in the Middle East including and attacks on vessels in the Red Sea by the Iran-backed Houthi group, have fueled fears of potential disruptions to global oil supplies. These events, along with increased hostilities, including Israel’s intensified bombing of the Gaza Strip, have directly influenced oil prices.

In April 2023, OPEC and its allies, including Russia, agreed to extend oil production cuts by 3.66 million barrels per day, or 3.7% of global demand. This decision, driven by concerns about weak global demand and the impact of a Western banking crisis, alongside efforts to stabilize the market and counteract speculative betting against oil prices, has significantly contributed to the current price levels. OPEC+ members agreed to extend their voluntary oil output cuts of 2.2 million barrels per day into the second quarter of 2024.