Oil prices up on supply woes

Oil prices increased on Wednesday as crude oil inventories in the US, the world’s biggest oil consumer, dropped by more than market expectations against the backdrop of supply concerns after the Saudi energy minister hinted at possible supply cuts to prevent extreme market volatility.

International benchmark Brent crude traded at $100.31 per barrel at 10.08 a.m. local time (0708 GMT) for a 0.09% increase from the closing price of $100.22 a barrel in the previous trading session.

American benchmark West Texas Intermediate (WTI) was at $93.95 per barrel at the same time for a 0.22% gain after the previous session closed at $93.74 a barrel.

Prices increased around 4% during the previous trade, extending gains over a possible demand recovery in the US.

The American Petroleum Institute (API) predicted a drop in US crude oil stockpiles late Tuesday of 5.6 million barrels, compared to the market expectation of a fall of 450,000 barrels.

A significant drop in inventories indicates an increase in crude demand in the US, the world’s largest oil consumer, assuaging market concerns over dwindling demand.

Investors are now looking to crude oil supply data from the US Energy Information Administration due later on Wednesday.

Supply concerns on Tuesday shook global oil markets after Saudi Arabia’s Energy Minister Abdulaziz bin Salman warned of a possible supply cut to correct prices, with a volatile paper oil market needing clarity to end the vicious circle, which is causing extreme fluctuations.

Salman said OPEC+ is working on a new agreement beyond 2022 and production cuts, as part of the current deal, which is scheduled to end in September 2022.

Further supporting price upticks, Kazakhstan oil deliveries could halt for several months due to damaged moorings.

“Dive teams uncovered cracks where subsea hoses attached to buoyancy tanks at two moorings at the Caspian Pipeline Consortium oil-loading terminal. Daily volumes had already been down 20% due to a string of other maintenance issues. Approximately 1.3 million barrels per day was expected in August,” Australia and New Zealand Banking Group (ANZ) commodity strategist Daniel Hynes said in an e-mailed note.

He further noted the Kazakh oil disruptions would help offset concerns of additional Iranian oil hitting the market as talks on the nuclear agreement gain traction.