Oil prices reached their highest level in over a year during Asian trading hours as crude stocks at a major storage hub dropped to their lowest level since July 2022. Crude inventories in Cushing, Oklahoma fell to 22 million barrels in the fourth week of September, a drop of 943,000 barrels compared to the previous week. The decline in inventories has led to concerns about the potential difficulties in getting crude oil out into the market if levels continue to dip. As a result, oil prices are expected to remain high for the rest of the year, with the possibility of further increases if OPEC+ continues to limit supplies.
The global oil markets are already experiencing a significant shortfall, and the cuts in oil production implemented by OPEC and its allies, including Saudi Arabia’s decision to extend its voluntary production cut until the end of the year, are expected to contribute to a robust deficit. However, there are concerns that prices reaching triple digits would not be in OPEC’s interest, as it could lead to long-term demand destruction. Therefore, it is projected that OPEC may signal a reduction in supply measures as the year progresses. Despite recent forecasts of $100 per barrel oil, Goldman Sachs believes that OPEC will be able to sustain Brent prices in the range of $80 to $105 in 2024 due to strong demand growth from the Asia region.
In summary, oil prices have surged to their highest level in over a year due to a decline in crude stocks at a key storage hub, raising concerns about the availability of crude oil in the market. The drop in inventories could lead to challenges in meeting demand if levels continue to decrease. As a result, oil prices are expected to remain high for the rest of the year, with the possibility of further increases if OPEC+ continues to limit supplies. However, there are concerns that prices reaching triple digits could result in long-term demand destruction, prompting OPEC to signal a reduction in supply measures. Despite recent forecasts of $100 per barrel oil, Goldman Sachs believes that OPEC will be able to sustain Brent prices between $80 and $105 in 2024 due to strong demand growth from Asia.