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Monday, February 26, 2024
HomeBusinessWTI, Brent oil prices hit 1-year high in significant surge.

WTI, Brent oil prices hit 1-year high in significant surge.

Oil prices reached their highest level in over a year as crude stocks at a major storage hub in Cushing, Oklahoma fell to their lowest levels since July 2022. The U.S. Energy Information Administration (EIA) reported that inventories at Cushing fell to 22 million barrels, close to the operational minimum. The decline in inventories poses a challenge for getting crude oil out into the market. Bart Melek, Managing Director of TD Securities, predicts that oil prices will remain at high levels for the rest of the year, with a potential upside risk if OPEC+ continues to limit supplies.

The global oil markets are facing a “pretty robust deficit,” according to Melek, who attributes this to the production cuts implemented by OPEC and its allies. Saudi Arabia, the leading member of OPEC, extended its voluntary crude oil production cut of 1 million barrels per day until the end of the year. This extension brings Saudi Arabia’s crude output to around 9 million barrels per day. Additionally, Russia has pledged to extend its 300,000 barrels per day export reduction until the end of December. Melek also highlights the upcoming decline in refinery throughputs as refinery maintenance season approaches, further impacting supply.

While prices are expected to remain high for some time, Melek believes this rally may not be permanent. He suggests that OPEC may signal towards the end of the year that they are done with strong measures to limit supply, as excessively high prices could result in long-term demand destruction. Forecasts for $100 per barrel oil have also emerged, with Goldman Sachs recently raising its 12-month Brent forecast from $93 per barrel to $100, citing modestly sharper inventory draws and strong demand growth from the Asia region.

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