Oil prices strengthened their rise after rising nearly 2% yesterday, Tuesday, amid signs of continued decline in US inventories, and in light of official expectations indicating a limited global deficit this year.
Brent crude oil was trading near $78 per barrel, while West Texas Intermediate crude oil surpassed $72. The American Petroleum Institute said that nationwide inventories fell by 5.2 million barrels last week, with levels in the Cushing Center also declining. The Energy Information Administration stated in monthly forecasts that global demand will exceed supply by 120,000 barrels per day in 2024, and it expected the average price of Brent crude to reach $85 next March.
Crude oil has fluctuated since the beginning of the year, rising and falling alternately over the past days so far, as traders try to gauge expectations for the coming quarters.
Factors supporting the oil market
The market got a boost from OPEC+ supply cuts, tensions in the Middle East, and supply disruptions in Libya, but the significant decline in official prices by Saudi Arabia suggests there is fundamental weakness within those prices.
US partners and coalition forces are responding to two separate Houthi attacks against commercial ships in the Red Sea, CNBC reported, citing unidentified US officials. There have been a series of attacks on ships in the vital waterway in recent weeks, with some shipping lines choosing not to travel through the region.
In a related development, crude oil inventories at the United States level decreased during four of the past five weeks, and the Energy Information Administration will update the tally later today, Wednesday. Inventories fell 4.1% in December, the largest monthly decline since June 2021.
The widely watched oil contract spreads reflect a slightly firmer market in the near term, with the gap between the two closest Brent contracts being 36 cents per barrel in the case of a backorder (which occurs when spot barrels are sold at higher premiums than later contracts), compared to 11 cents. Same situation a week ago.
