The price of the black liquid is bullish today as a result of mounting supply tightness concerns amid disruptions to Russian exports, the potential for major producers to cut output, and the partial shutdown of a U.S. refinery.
The global benchmark, Brent crude is up 0.4% in the London trading session today, currently trading $101.67 a barrel. This is the first time Brent is trading above $100 since it fell below this price range 15 days ago. The U.S. benchmark, the West Texas Intermediate (WTI) crude is bullish by 0.3%, currently trading $95.21 a barrel.
Both crude oil benchmark contracts touched three-week highs today after the Saudi energy minister flagged the possibility that the Organization of the Petroleum Exporting Countries and its allies (OPEC+), will cut production to support prices.
What you should know
- Discussions on an agreement on Iran’s nuclear programme remain stalled, calling into question any resumption of its exports. Talks between the European Union, the United States and Iran to revive the 2015 nuclear deal are continuing, with Iran saying it had received a response from the United States to the EU’s “final” text to resurrect the agreement.
- ANZ analysts, Daniel Hynes and Soni Kumari said that if a deal eventuates, it will likely weigh on sentiment and lower prices in the short term as the deal raises the prospect of 1 million barrels per day of Iranian oil hitting the market. They however stated, “Nevertheless, the market will remain tight as the deal will not offset the fall in Russian supply and the ongoing recovery in demand.”
- In the United States, the world’s biggest oil consumer, British Petroleum (BP), reported shutting some units at its Whiting refinery in Indiana after an electrical fire on Wednesday. The 430,000 barrel-per-day plant is a key supplier of fuels to the central United States and the city of Chicago.
- Falling U.S. crude and product stockpiles also added to the upward pressure on prices. Oil inventories fell by 3.3 million barrels in the week to Aug. 19 at 421.7 million barrels, steeper than analysts’ expectations in a Reuters poll for a 933,000-barrel drop.
- The bullish impact was countered by a drawdown in gasoline inventories that was less than expected, reflecting tepid demand. U.S. gasoline stocks fell by 27,000 barrels in the week to 215.6 million barrels, compared with earlier expectations for a 1.5-million-barrel drop.
Citi analysts explained in a note that, “Brent crude oil prices rebounded above the $100/barrel mark following Saudi officials showing willingness to defend prices via an OPEC+ production cut if necessary.”