The Tightening Supply worries markets as US crude prices near the $100 mark
Crude Oil Prices Reach Highest Point in Over a Year
Oil Prices on the Rise
Crude oil prices have reached their highest points in more than a year, causing concern in the market. The United States’ West Texas Intermediate and international market Brent crude have both seen significant increases. This rise in prices is worrying for governments, businesses, and consumers who were hoping for relief from high consumer prices.
The Organization of Petroleum Exporting Countries (OPEC) is planning to discuss production cuts on October 4. Currently, OPEC and key producers Saudi Arabia and Russia have already reduced production by 1.3 million barrels a day. These cuts are expected to continue until the end of the year.
A recent report has shown that stockpiles at a major US storage hub, Cushing, Oklahoma, are at their lowest levels since last July. This is due to increased exports and refining. Cushing is an important delivery point for crude oil futures contracts.
Impact on the Economy
The current strength of oil prices relies on the assumption that major economies will continue to recover from the effects of the COVID-19 pandemic. However, higher interest rates and inflation may slow down economic activity and increase debt levels. This could potentially reduce the demand for crude oil.
While there is not much specific data related to the oil market for the rest of the week, investors will be paying attention to speeches from the United States Federal Reserve, including Chair Jerome Powell. Additionally, important inflation numbers from the world’s largest economy will be released.
Oil prices have broken out of the trading range they have been stuck in since November of last year. The next resistance level to watch is $97.82, followed by the psychological milestone of $100 per barrel. However, after a strong upward trend, some consolidation is expected before further gains. If prices reverse, initial support can be found around $92.30, with additional support at $88. Durable declines below that point will bring attention to support levels around $84.43, although this is unlikely in the near term.