World Oil Prices Soar As US Stocks Drop, Fuel Demand Rises

Illustration. (Photo: Doc. Antara)

JAKARTA - Oil prices settled higher in late trading Wednesday (Thursday September 23, WIB) after US crude stockpiles fell to their lowest level in three years as refining activity recovered from the damage from recent storms, while demand for fuel increased in line with ongoing economic recovery.

US West Texas Intermediate (WTI) crude futures for November delivery rose 1.74 dollars, or 2.5 percent, to close at 72.23 dollars per barrel. Brent crude futures for November delivery jumped 1.83 dollars, or 2.5 percent, to settle at 76.19 dollars a barrel.

Despite recent staggering off US economic figures, overall fuel demand has recovered to pre-pandemic levels. Product supplied over the past four weeks has reached nearly 21 million barrels per day, not far from the 2019 highs.

U.S. crude inventories last week slumped 3.5 million barrels to 414 million barrels, their lowest since October 2018, the U.S. Energy Information Administration (EIA) said Wednesday September 22.

"Crude oil prices remain supported as demand recovers around the world and supplies continue to dwindle," said Andrew Lipow, president of Lipow Oil Associates in Houston.

Oil facilities in the Gulf of Mexico continue to return to production, with weekly output rising by 500,000 bpd in the last week to 10.6 million bpd, the EIA said. Oil and gas company BP on Wednesday said its four offshore facilities in the region had resumed operations after Hurricane Ida, revived and into production on Sept. 12.

Also supporting prices are difficulties by OPEC members struggling to increase production. Rising prices in other markets such as natural gas are also supporting oil, with energy market shortages causing supply crises in Europe and Asia.

"Given the various enabling factors in the energy space, particularly very high natural gas prices, the current price decline is likely to be short-lived," said Jeffrey Halley, an analyst at broker OANDA.

Iraq's oil minister said OPEC and its allies were working to keep crude prices near 70 dollars a barrel as the global economy recovered, state-owned news agency INA reported on Wednesday September 22.

The US Federal Reserve, which begins its two-day policy meeting on Tuesday 21 September, signaled a rate hike may follow sooner than expected. Tightening monetary policy could cut investors' tolerance for riskier assets such as oil.