Oil Prices Surge on US Strategic: Oil prices advanced on Monday, marking a second consecutive session of gains. U.S. initiatives to replenish strategic reserves contributed to the uptick, offering some relief amid lingering concerns of crude oversupply and a potential slowdown in fuel demand growth next year.
As of 0735 GMT, Brent crude futures experienced a 0.7% increase, equivalent to 56 cents, reaching $76.40 per barrel. Simultaneously, U.S. West Texas Intermediate crude futures rose by 0.7%, or 48 cents, to $71.71 per barrel. Despite both contracts surging over 2% on Friday, they faced their seventh consecutive weekly decline, marking the longest streak of weekly drops since 2018.
The recent downturn prompted the U.S. to act, aiming to acquire up to 3 million barrels of crude for the Strategic Petroleum Reserve (SPR) with delivery scheduled for March 2024. Analyst Tony Sycamore from IG noted, “We know the Biden Administration is in the market looking to refill the SPR, which will provide support.” Additionally, technical chart indicators were cited as supporting factors.
While OPEC+ committed to cutting 2.2 million barrels per day (bpd) in the first quarter, concerns persisted among investors about actual supply reductions. Non-OPEC countries’ output growth is anticipated to contribute to excess supply in the coming year. RBC Capital Markets projected stock draws of 700,000 bpd in the first half but only 140,000 bpd for the full year.
RBC analysts cautioned that price volatility and uncertainty would persist until the market sees concrete data on compliance with voluntary output cuts. Implementation is slated for the next month, with country-level production data following in January, creating a volatile two-month period before preliminary clarity emerges.
China, the world’s leading oil importer, released its latest consumer price index data, revealing rising deflationary pressures and casting doubt on the country’s economic recovery. Chinese officials pledged efforts to stimulate domestic demand and strengthen economic recovery in 2024.
Investors are closely monitoring five central bank meetings, including the Federal Reserve, for guidance on interest rate policies this week. Additionally, data on U.S. inflation is under scrutiny for its potential impact on the global economy and oil demand.
Also read: Oil Prices Face Uphill Battle Amid Global Surplus Concerns and Demand Woes
Our Reader’s Queries
What might cause the price of oil to rise in the United States?
In early 2022, COVID-19 restrictions were lifted, resulting in increased economic activity, higher demand for oil, and lower inventory. However, the invasion worsened supply issues and added to the already rising prices. Despite other economic factors being in play, the invasion had a significant impact on the situation.
What is causing the spike in oil prices?
The demand for fuel is on the rise as travel rebounds from the COVID-19 pandemic. A strong U.S. economy is driving up the demand and price of oil, while China and Europe’s weak growth is having the opposite effect. This poses a big question for the industry.
What is the level of US strategic oil reserve?
The Strategic Petroleum Reserve Stocks for US Crude Oil currently stands at 353.33M, which is a slight increase from last week’s 352.54M but a significant decrease from 378.62M recorded a year ago. This represents a 0.22% change from last week and a -6.68% change from one year ago.
What will be the price of oil in 2024?
Experts are predicting that the oil prices in 2024 will hover around $90 per barrel. The U.S. Energy Information Administration (EIA) has forecasted that the global benchmark, Brent crude, will average at $93 per barrel, which is an increase from the expected average of $84 per barrel in 2023.