oil prices surge 28%

Oil Prices Surge 28% in Q3 2023

Global oil prices experienced a significant surge of 28% in the last quarter, culminating in a peak for 2023 in September. This surge can be attributed to a combination of OPEC+ output cuts and additional supply constraints enforced by key players Saudi Arabia and Russia, resulting in a market deficit.


With oil prices now teetering near the $90 per barrel mark, analysts at JPMorgan have cautioned that a decline in demand is on the horizon. Natasha Kaneva, leading the charge as the head of JPMorgan’s global commodities strategy team, expounded on this sentiment in their latest client note titled “Demand destruction has begun (again)”. Kaneva highlighted the shift from inventory draws observed over the summer to a modest build projected in the final months of this year.


Furthermore, Kaneva noted that the impact of mounting oil prices is palpable in the United States, Europe, and select emerging market nations. Both China and India, pivotal drivers of global oil demand growth, opted to tap into their domestic crude reserves in August and September following the surge in prices.


Gasoline, a derivative of oil, bore the brunt of this price surge, hitting a zenith for 2023 in September. Kaneva and her team contended that consumers may have reached their threshold for enduring high gasoline prices, leading to a notable reduction in fuel consumption.


In tandem with the 28% surge in oil prices, diesel prices experienced an astonishing 30% escalation, directly affecting transportation, construction, and agricultural sectors. The amplified costs of freight and food production subsequently led to a spike in jet fuel prices, prompting a chorus of warnings from various airlines.


West Texas Intermediate and Brent futures did not lag behind, breaching the $93 and $96 per barrel marks, respectively. Subsequently, prices have retreated somewhat, with WTI trading above $86 per barrel and Brent above $88 per barrel as of Wednesday.


The question now looming is whether these recent highs signal a culmination, or if the beginnings of demand destruction are just emerging. It is imperative to maintain vigilant oversight over the prices of oil and its derivatives, as heightened consumption levels can incite supply shocks, while diminished consumption may yield analogous results if demand destruction takes hold.

Source: Yahoo Finance

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