By Adedapo Adesanya
Brent crude returned to the $100 mark on Tuesday after it rose by $3.74 or 3.9 per cent to sell at $100.22 per barrel as Saudi Arabia floated the idea of output cuts to support prices in the case of returning Iranian crude.
Also, the price of the United States West Texas Intermediate (WTI) crude closed higher by $3.38 or 3.7 per cent to trade at $93.74 a barrel. This showed that the Brent settled at its highest price since August 2 and WTI logged its strongest settlement since August 11.
The Saudi energy minister, Prince Abdulazziz bin Salman, said the Organisation of the Petroleum Exporting Countries and allies (OPEC+) had the means to deal with challenges including cutting production.
The Saudi minister said the paper and physical oil markets had become “disconnected.”
However, OPEC+ production cuts may not be imminent and would coincide with the return of Iran to oil markets should the Middle East clinch a nuclear deal with the West.
The prospect of resuming Iranian crude supply and recession fears had gripped the market over the past few weeks.
On Monday, it was reported that Iran had dropped some of its main demands on resurrecting a deal.
Oil has soared in 2022, coming close in March to an all-time high of $147 after Russia’s invasion of Ukraine exacerbated supply concerns. Fears about a global recession, rising inflation and weaker demand have since weighed on prices.
Underlining tight supply, the latest US inventory weekly reports are expected to show crude stocks declining 900,000 barrels last week.
U.S. crude stockpiles were expected to have fallen, while fuel stocks rose in the latest week, according to market sources citing American Petroleum Institute (API) figures on Tuesday.
API reported a large draw this week for crude oil of 5.632 million barrels, while analysts predicted a draw of 448,000 barrels.
The build comes as the Department of Energy released a massive 8.1 million barrels from the Strategic Petroleum Reserves (SPR) in the week ending August 19, leaving the SPR with just 453.1 million barrels.
US crude inventories have shed some 67 million barrels since the start of 2021, with a 4 million barrel gain since the start of 2020, according to API data.
In the week prior, the API reported a draw in crude oil inventories of 448,000 barrels after analysts had predicted a draw of 117,000 barrels.
The market will await the official government data due on Wednesday from the US Energy Information Administration (EIA).
Modupe Gbadeyanka