Oil prices held steady near $90 per barrel in New York on Wednesday, propelled by dwindling global fuel supplies that enticed hedge funds back into the market. Speculators have been amassing bullish positions on West Texas Intermediate (WTI), marking the highest levels since February 2022. Additionally, a rally in key indicators on the nearest segment of the futures curve underscored concerns of supply scarcity.
Last week, Russia declared a temporary ban on diesel and gasoline exports, a move that subsequently led to an uptick in fuel prices. Concurrently, U.S. crude stockpiles registered another decline, with stocks at the pivotal storage hub in Cushing, Oklahoma, observed to be at critically low levels.
China, the world’s largest oil importer, is gearing up for the Golden Week holiday starting this Friday. This extended break is anticipated to spur a surge in demand for jet fuel. Projections indicate that over 21 million individuals are expected to take to the skies during this eight-day period, following a historic surge in air-passenger traffic witnessed in July and August.
Since the end of June, oil prices have surged by 25%, poised for the most significant quarterly gain since March 2022. This rally has been propelled by production cuts orchestrated by OPEC+ leaders Saudi Arabia and Russia. As prices surge, conversations about the potential for $100-a-barrel crude have intensified, alongside heightened price pressure on oil-importing nations.
Arne Lohmann Rasmussen, Head of Research at A/S Global Risk Management, expressed, “We have long advocated for a taut oil-market equilibrium. Given the underlying fundamentals, we believe the likelihood of a substantial downturn in prices has diminished. Consequently, we view the present level as a strategic buying opportunity.”
The pivotal question now is whether OPEC+ will sustain the current low supply levels, while the future of oil prices teeters on the $90 threshold, contingent on decisions made by key industry players, leaving the larger inquiry of OPEC+’s effectiveness in overseeing the pricing and accessibility of this sought-after commodity to be answered by time alone..