A larger than usual draw from the United States’ crude stockpile drove oil prices up by 3% on Wednesday, June 28th. According to the Energy Information Administration (EIA), crude inventories were down by 9.6 million barrels the week before. This was greatly in excess of the 1.8 million barrel draw foreseen by analysts and is significantly higher than the 2.8 million barrel draw in June of last year.
Indeed, some experts opine that this contradicts statements made by a number of parties who earlier claimed that the US fuel market is oversupplied.
With regard to the market, benchmark Brent crude futures were up by 2.5%, settling at $74.03 a barrel. US West Texas Intermediate Crude, on the other hand, went up by 2.8% to $69.56 – a figure that essentially reduces Brent’s premium to its lowest in nearly a month.
At the same time, the twelve-month backwardation (a pricing dynamic that refers to higher demand for immediate delivery) for both Brent Crude and WTI are at their lowest since December of last year. Some experts from Gelber and Associates, an energy consultancy, remarked that this could decrease concerns about an oil supply shortage in the near future.
Analysts also foresee a tightening in the fuel market within the second half of this year. Such a tightening will be the cumulative result of reduced output on the part of the Organization of the Petroleum Exporting Countries and its allies (OPEC+), as well as Saudi Arabia’s impending supply reduction next month.
As a result of this development, many investors remain uneasy as higher fuel prices could lead to reduced oil demand which, in turn, could spell a slowdown in economic growth. Impending policy tightening on the part of the US Federal Reserve and other central banks, as well as the possibility of further interest rate hikes to cool inflation down could also lead to a further slowdown.