Bloomberg News reports that oil was propelled closer to the $100 per barrel mark. This happened following a drop in the stockpiles at the major US storage hub. The plunge was marked at critical levels, thereby highlighting a broader global deficit.
Status at Delivery Points
West Texas Intermediate popped briefly over $95 per barrel for the first time in more than 12 months after a jump of 3.6^ on Wednesday. This was the biggest gain as compared to what it was in early May.
The delivery point for the US benchmark with inventories at Cushing, Oklahoma plunged slightly below 22 million barrels. This figure is the lowest since July 2022. And it is also close to the operational minimums.
As per official data on Wednesday, the overall US crude stockpiles dropped more than what was anticipated. This has offered evidence of the fast market tightening because of supply cuts from Russia and Saudi Arabia. WTI has soared by about one-third since June end and is on track for the biggest quarterly profit since early 2022. It triggered the inflation and was a cause of headaches for the central banks.
OPEC forecast
Towards the beginning of this month, the OPEC forecast predicted a deficit of around 3 million barrels per day of crude in the fourth quarter. Since demand in China and the US is proving resilient, many markets see oil as inevitable. It is even with the dollar rallying and withies almost as high globally as interest rates persist.
How is Physical Tightening Manifested?
The physical tightening is being manifested in the future curve of the oil. A prompt from the WTI spread has soared to $2.57 per barrel in a bullish backwardation structure that was just 61 cents midweek last. There are concerns in the options trading segment as well manifesting bigger price swings.
Meanwhile, the stockpiles at Cushing have plunged for the seventh week straight and many traders have considered them already to have been at the lowest levels allowing tanks to operate normally. The last-minute supplies from the hub are increasingly becoming quite expensive. And for overseas buyers, American crude is getting costlier for similar reasons. Demand appears to be holding even though the prices are higher. Consumption of transport fuels globally picked up last week, too. It was a result of Chinese trucking activity and an increase in overseas travel just before the Golden Week holiday, as revealed in a note by JP Morgan Chase & Co.
