Crude Oil Stumbles After Reaching $86 Early Thursday
By Adedapo Adesanya
Crude oil prices tumbled at later sessions on Thursday after hitting a three-year high of $86 per barrel earlier in the day driven by tight supply and continuous global energy crunch.
Brent crude fell 1.26 per cent or $1.08 to close at $84.74 per barrel while the United States West Texas Intermediate (WTI) recorded a fall of 95 cents or 0.79 per cent to settle at $82.63 a barrel.
The prices of the black gold eased as some investors took profits on signs that the rally was looking overstretched.
The market is witnessing one of the best periods post-COVID and the latest catalyst is a supply report from the US Energy Information Administration (EIA) showing crude and fuel inventories tightened, with crude inventories at the Cushing storage hub falling to a three-year low.
On Wednesday, the agency reported a surprise crude inventory draw of 400,000 barrels for the week to October 15. At 426.5 million barrels, commercial crude inventories remain below the five-year average for this time of the year.
Moreover, crude oil inventories at the Cushing hub fell by more than 2 million barrels, which leaves them at 31.23 million barrels, the lowest level since 2018.
In addition, the reluctance of the Organisation of the Petroleum Exporting Countries and allies (OPEC+) to pump more oil continues to support the market with analysts noting that oil prices will remain well supported for the remainder of this year just as coal and natural gas shortages drive greater crude consumption.
Market leader and OPEC+ Chair, Saudi Arabia, said any extra oil from OPEC+ would do little to tame the surging cost of gas, predicting demand may rise as much as 600,000 barrels a day if the northern hemisphere’s winter is colder than normal.
The oil market is tightening but neither additional supply from OPEC+ nor a US Strategic Petroleum Reserve (SPR) release will meet the growing demand for sweet grades.
Meanwhile, the resurgence of lockdowns in Eastern Europe and Russia due to rising coronavirus cases are threatening the global economic recovery that has buoyed commodities and energy markets.
Pressure also emanated from a drop in coal and natural gas prices as coal prices fell 11 per cent in China, extending losses this week since Beijing signalled it might intervene to cool the market.
Despite this, some forecasters note that oil will likely hit $90 per barrel this year or before the end of the first quarter of 2022.